Question

At May 1, 2018, Bibby Company had beginning inventory consisting of 200 units with a unit...

At May 1, 2018, Bibby Company had beginning inventory consisting of 200 units with a unit cost of $7. During May, the company purchased inventory as follows:

800 units at $7

600 units at $8

The company sold 1,000 units during the month for $12 per unit. Bibby uses the average cost method.

What is the average cost per unit for May?

What is the value of Bibby’s inventory at May 31, 2018?

Business   Accounting   
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Homework Answers

Answer #1

Cost of units available for sale = (200 units * $7) + (800 units * $7) + (600 units * $8)

= $1,400 + $5,600 + $4,800

= $11,800

Number of units available for sale = 200 units + 800 units + 600 units

= 1,600

Average cost per unit for May = Cost of units available for sale / Number of units available for sale

= $11,800 / 1,600

= $7.375

Units in Ending inventory = Number of units available for sale - Units sold

= 1,600 - 1,000

= 600

Value of Bibby’s inventory at May 31, 2018 = 600 units * $7.375 per unit

= $4,425

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