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A company just began business and made the following four inventory purchases in June: June 1...

A company just began business and made the following four inventory purchases in June:


June 1 126 units $830

June 10 168 units 1128

June 15 168 units 1152

June 28 126 units 892

For a total amount of $4002


A physical count of merchandise inventory on June 30 reveals that there are 170 units on hand. Using the average-cost method, the amount allocated to the ending inventory on June 30 is

a. $1203.

b. $1157.

c. $1120.

d. $1141.

Business   Accounting   
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Homework Answers

Answer #1

The amount allocated to the ending inventory on June 30 using the average-cost method,

Average unit cost

Average unit cost = Cost of goods available for sale / Total number of units

= $4,002 / [126 units + 168 units + 168 units + 126 units]

= $4,002 / 588 units

= $6.8061 per unit

The amount allocated to the ending inventory on June 30

The amount allocated to the ending inventory on June 30 = Number of units at the end of the period x Average cost per unit

= 170 units x $6.8061 per unit

= $1,157

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