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17 November, 23:07

Davidson Electronics has the following: Units Unit Cost Inventory, Jan. 1 5,000 $ 8 Purchase, April 2 15,000 10 Purchase, Aug. 28 20,000 12 If Davidson has 7,000 units on hand at December 31, the cost of ending inventory under the average-cost method is: Select one: a. $84,000. b. $70,000. c. $56,000. d. $75,250.

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  1. 18 November, 00:21
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    Option (d) $75,250

    Explanation:

    Data provided in the question:

    Units Unit Cost

    Inventory, Jan. 1 5,000 $8

    Purchase, April 2 15,000 $10

    Purchase, Aug. 28 20,000 $12

    Units on hand = 7,000

    Now,

    Total cost of the inventory

    = (5,000 * $8) + (15,000 * $10) + (20,000 * $12)

    = $40,000 + $150,000 + $240,000

    = $430,000

    Therefore,

    Average cost of the inventory = [ Total cost of the inventory ] : [ Total units ]

    = $430,000 : (5,000 + 15,000 + 20,000)

    = $430,000 : 40,000

    = $10.75 per unit

    Thus,

    Cost of ending inventory = Units on hand * Average cost of the inventory

    = 7,000 * $10.75

    = $75,250

    Option (d) $75,250
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