A new company has inventory data for an item purchased during the year. The year-end ending inventory is 1,000 units. Using the periodic system, average cost method, what is the cost of the merchandise inventory at year-end? The purchase activity is as follows: Date No. of Items Purchased Cost/Unit Total Cost

Jan. 16 800 $7.00 $ 5,600
Mar. 18 2,200 $8.00 17,600
Nov. 23 2,000 $9.00 18,000

Total 5,000 $41,200

$8,240

Explanation:

The computation of the ending inventory using the average cost method under a periodic system is shown below:

But before that first determine the weighted average cost per unit which is

The Weighted average cost per unit

= $41,200 ÷ 5,000  units

= $8.24 per unit

Now the ending inventory is

= 1,000 units × $8.24 per unit

= $8,240

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