Given the following data, calculate the cost of ending inventory using the average cost method. (round any intermediary and final answers to two decimal places.)

date item unit
1/1 beginning inventory 40 units at $30 per unit
3/5 purchase of inventory 20 units at $10 per unit
5/30 purchase of inventory 25 units at $22 per unit
12/31 ending inventory 20 units

(a) $413 (b) $459 (c) $200 (d) $550

(B) $459

Explanation:

For computing the average cost per unit is shown below:

= (Beginning inventory units × price per unit + purchase inventory units × price per unit + purchase inventory units × price per unit ) ÷ (Beginning inventory units + purchase inventory units + purchase inventory units)

= (40 units × $30 + 20 units × $10 + 25 units × $22) ÷ (40 units + 20 units + 25 units)

= ($1,200 + $200 + $550 units ) ÷ (85 units)

= ($1,950 units) ÷ (85 units)

= $22.94 per unit

Now the ending inventory would be

= Ending inventory units × average cost per unit

= 20 units × $22.18 per unit

= $458.82

The purchase units = 20 units + 20 units = 40 units

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