Question

In its first month of operations, Cullumber Company made three purchases of merchandise in the following sequence: (1) 200 units at $6, (2) 300 units at $8, and (3) 500 units at $9. Assuming there are 100 units on hand at the end of the period. Cullumber uses a periodic inventory system. Compute the cost of the ending inventory under the average-cost method. (Round the cost per unit to 3 decimal places, e.g. 8.875 and the final answer to 0 decimal places, e.g. 5,275.)

Answer 1

Cullumber company purchase 1 200 units at a cost of $6

Cullumber company purchase 2 300 units at a cost of $8

Cullumber company purchase 3 500 units at a cost of $9

Total cost of Cullumber inventory purchase

= (200 ×6) + (300 × 8) + (500 × 9) = $8,100

Total number of units Cullumber purchase

= 200 + 300 + 500 = 1,000 units

Cullumber company purchase total 1,000 units at a cost of $8,100

Cullumber company average cost per unit = total cost / total number of units

Cullum company average cost per unit

= 8,100 / 1,000 = $8.1

Per unit Average cost of Cullumber company is $8.1

Cullumber company ending inventory is 100 units

Cost of ending inventory of Cullumber company under average cost

= 100 × 8.1 = $810

Cullumber company cost of ending inventory is $810 under average costing system.

Totally 1,000 units are purchased 100 units in ending inventory, it means 900 units are sold.

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