Asked by Maria Alanis on May 13, 2024
Verified
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) $655
B) $620
C) $690
D) $659
Average cost method
An inventory costing method that assigns the average cost of all similar items to the cost of goods sold and to ending inventory.
Periodic system
An inventory accounting system that updates inventory balance and cost of goods sold at the end of an accounting period.
Ending inventory
The total value or quantity of goods on hand at the end of an accounting period.
- Determine the closing inventory amount and calculate the cost of goods sold using diverse inventory pricing techniques.
Verified Answer
CG
Calvin GonzalezMay 18, 2024
Final Answer :
D
Explanation :
The average cost method calculates the cost of ending inventory by taking the total cost of goods available for sale and dividing it by the total units available for sale, then multiplying the result by the ending inventory units. The total cost of goods available for sale is (10 units * $30) + (25 units * $32) + (30 units * $34) + (10 units * $35) = $300 + $800 + $1020 + $350 = $2470. The total units available for sale are 10 + 25 + 30 + 10 = 75 units. The average cost per unit is $2470 / 75 = $32.93. The cost of the ending inventory is $32.93 * 20 units = $658.6, rounded to the nearest dollar is $659.
Learning Objectives
- Determine the closing inventory amount and calculate the cost of goods sold using diverse inventory pricing techniques.
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