Question

In: Accounting

The following lots of a particular commodity were available for sale during the year: Beginning inventory...

The following lots of a particular commodity were available for sale during the year:
Beginning inventory 10 units at $30
First purchase 25 units at $32
Second purchase 30 units at $34
Third purchase 10 units at $35

The firm uses the periodic system, and there are 20 units of the commodity on hand at the end of the year. What is the amount of inventory at the end of the year rounded to the nearest dollar according to the average cost method?

a. $690
b. $620
c. $659
d. $655

Solutions

Expert Solution

  • Step #1: Calculate Average Cost

Average Cost = $ 2470 / 75 = $ 32.93

Units

Cost/unit

COG for sale

Beginning Inventory

10

$                30.00

$                            300.00

Purchases:

0

$                       -  

$                                     -  

25

$                32.00

$                            800.00

30

$                34.00

$                        1,020.00

10

$                35.00

$                            350.00

TOTAL

75

$              32.933

$                        2,470.00

  • Step #2: Calculate Ending Inventory cost = Answer

20 units x $ 32.93 = $ 658.6
= $ 659

  • Correct Answer = Option ‘C’ $ 659

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