Answer:
Option (b) is correct.
Explanation:
Given that,
Beginning inventory = 200 units with a unit cost of $7
Purchases during May:
800 units at $7
600 units at $8
Number of units sold = 1,000 for $12 per unit
Here, we are using a average cost method,
The average cost per unit for May is simply calculated by dividing the total cost in May by the number of units.
Total cost:
= Beginning inventory + Purchases in May
= (200 × $7) + [(800 × $7) + (600 × $8)]
= $1,400 + ($5,600 + $4,800)
= $11,800
Total number of units:
= Beginning inventory + Purchases in May
= 200 units + (800 units + 600 units)
= 200 units + 1,400 units
= 1,600 units
Therefore, the average cost per unit for May is as follows:
= Total cost in May ÷ Number of units
= $11,800 ÷ 1,600 units
= $7.375
