The following lots of Commodity Z were available for sale during the year. Use this information to answer the question. Beginning inventory 10 units at $30 First purchase 25 units at $32 Second purchase 30 units at $34 Third purchase 10 units at $35 The firm uses the periodic system. There are 20 units of the commodity on hand at the end of the year. What is the amount of inventory at the end of the year rounded to nearest dollar according to the average cost method? a.$620 b.$659 c.$690 d.$655

$659

Explanation:

For computing the ending inventory using the average cost method first we have to determine the average cost per unit which is shown below:

Average cost per unit is

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

= (10 units × $30 + 25 units × $32 + 30 units × $34 + 10 units × $35) ÷ (10 units + 25 units + 30 units + 10 units)

= ($300 + $800 + $1,020 + $350  ) ÷ (75 units)

= ($2,470 ) ÷ (75 units)

= $32.93 per unit

So, the ending inventory is

= Ending inventory units × average cost per unit

= 20 units × $32.93

= $659

d. all of the above are true.