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23 December, 02:03

At May 1, 2018, Kibbee Company had beginning inventory consisting of 200 units with a unit cost of $7. During May, the company purchased inventory as follows: 800 units at $7 600 units at $8 The company sold 1,000 units during the month for $12 per unit. Kibbee uses the average cost method. The average cost per unit for May is

a.$7.000.

b.$7.375.

c.$7.500.

d.$8.000.

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  1. 23 December, 04:40
    0
    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
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