Question

During the last year Leathers Unlimited sold 702 jackets. Inventory records for the year are as follows:

 

DATE 
QUANTITY
COST
TOTAL
January 1Beginning Inventory
100
$79
$ 7,900
March 21Purchase
300
60
18,000
July 8Purchase
450
62
27,900
October 1Purchase
400
58
23,200
December 14Purchase
100
77
7,700
Total available for sale
 
1,350
                         $84,700

Using the average cost method of inventory pricing calculate the dollar value of the ending inventory.(Round the average cost per unit to the nearest cent)

Answer 1

Cost of goods available for sale = $84,700
Number of units available for sale = 1,350

Average cost per unit = Cost of goods available for sale / Number of units available for sale
Average cost per unit = $84,700 / 1,350
Average cost per unit = $62.74

Number of units in ending inventory = Number of units available for sale - Number of units sold
Number of units in ending inventory = 1,350 - 702
Number of units in ending inventory = 648

Cost of ending inventory = Number of units in ending inventory * Average cost per unit
Cost of ending inventory = 648 * $62.74
Cost of ending inventory = $40,655.52 or $40,656