Question

Fulbright Corp. uses the periodic inventory system. During its first year of operations, Fulbright made the following purchases (listed in chronological order of acquisition):

•	44 units at $98
•	70 units at $74
•	173 units at $67

Sales for the year totaled 275 units, leaving 12 units on hand at the end of the year. Ending inventory using the average cost method is (Do not round unit cost calculation. Round your final answer to the nearest whole dollar amount):

Answer 1

Under periodic inventory system, the average cost method is calculated by dividing the total cost of goods available for sale by total number of units available for sale.

Total no. of units available for sale = 44 units+70 units+173 units = 287 units

Total cost of goods available = (44 units*$98)+(70 units*$74)+(173 units*$67)

= $4,312+$5,180+$11,591 = $21,083

Average cost per unit = Total cost of goods available for sale/Total no. of units

= $21,083/287 units = $73.45993 per unit

Ending Inventory in units = 12 units

Ending Inventory (in $) = Units in Ending Inventory*Average Cost per unit

= 12 units*$73.45993 = $882

Therefore the ending inventory using the average cost method is $882.