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Unitech has the following inventory information. July 1 Beginning Inventory 20 units at $19 $ 380 7 Purchases 70 units at $20 1,400 22 Purchases 10 units at $22 220 $2,000 A physical count of merchandise inventory on July 31 reveals that there are 30 units on hand. Using the average-cost method, the value of ending inventory is A. $580. B. $600. C. $610. D. $620.

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Answer:

B. $600

Explanation:

The average cost method assigns a cost to inventory items based on the total cost of goods purchased (or produced) in a period divided by the total number of items purchased (or produced). Weighted Average Unit Cost is calculated by following formula:

Weighted Average Unit Cost = Total Cost of Inventory /Total Units in Inventory

Total value purchased in July = $1,400+$220 = $1,620

Weighted Average Unit Cost = ($380+$1,620)/100 = $20

Ending inventory = 30 x $20 = $600

Noted: The company did not have date of selling merchandise. In the situation, assuming that the company uses periodic inventory system.