Question

Given the following inventory activity, what is ending inventory using the perpetual average costing method? (Round any inter

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Answer #1

Correct option is B. 145 unit @$3.48

Explanation:

Under perpetual inventory method cost is to be calculated at the time of each sale:

90 units @$3 = $270

50 units @$2.50 = $125

Total cost = $395

Average cost = $395 / 140 units = $2.82

Sale = 25 units @$2.82 = $70.5

Remaining inventory balance = $395 - $70.5 = $324.5

Next purchase = 30 units @$6 = $180

Total cost of inventory = $324.5 + $180 = $504.5

Number of units = 145

Average cost = $504.5 / 145 = $3.48

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