Question

June 1 110 units $380
June 10 160 units $575
June 15 160 units $820
June 28 120 units $700
A physical count of merchandise inventory on June 30 reveals that there are 220 units on hand. Using the average cost method, the amount allocated to the ending inventory on June 30 is?

Answer 1

To calculate the ending inventory amount using the average cost method, first, we need to determine the total cost of the inventory purchased and the total number of units available for sale. Then we can calculate the average cost per unit and multiply it by the number of units remaining at the end of the period.

Here are the details of the purchases made:

1. **June 1**: 110 units at $380
- Cost per unit: \( \frac{380}{110} = 3.4545 \)
- Total cost = $380

2. **June 10**: 160 units at $575
- Cost per unit: \( \frac{575}{160} = 3.59375 \)
- Total cost = $575

3. **June 15**: 160 units at $820
- Cost per unit: \( \frac{820}{160} = 5.125 \)
- Total cost = $820

4. **June 28**: 120 units at $700
- Cost per unit: \( \frac{700}{120} = 5.8333 \)
- Total cost = $700

### Step 1: Calculate total units and total cost

**Total units purchased:**
- June 1: 110 units
- June 10: 160 units
- June 15: 160 units
- June 28: 120 units

Total units = 110 + 160 + 160 + 120 = 550 units

**Total cost of purchases:**
- June 1: $380
- June 10: $575
- June 15: $820
- June 28: $700

Total cost = $380 + $575 + $820 + $700 = $2475

### Step 2: Calculate the average cost per unit

Average cost per unit = \( \frac{\text{Total cost}}{\text{Total units}} \)
\[
\text{Average cost per unit} = \frac{2475}{550} \approx 4.5
\]

### Step 3: Calculate the ending inventory value

Ending inventory units = 220 units

Ending inventory value = Average cost per unit × Ending inventory units
\[
\text{Ending inventory value} = 4.5 \times 220 = 990
\]

Thus, the amount allocated to the ending inventory on June 30 using the average cost method is **$990**.