Hank\'s Hardware, which sells sheers of sandpaper in bulk. October 1 Hank had 4,

Question

Hank's Hardware, which sells sheers of sandpaper in bulk. October 1 Hank had 4,000 sheets of sandpaper at the average cost of $0.25 each.The store also made the following purchases of sandpaper inventory during the month:
10/3 800 units purchased 8000 $0.24 cost per unit 1,920 total cost
10/17 3000 units purchased $0.26 cost per unit 780 total cost
10/21 6000 units purchased $0.28 cost per unit 1,680 total cost
10/29 4000 units purchased $0.27 cost per unit 1,080 total cost
Total units purchased 21000 Total cost 5,460
If the store sold 23,000 sheets of sandpaper during October, what is the ending average cost method of inventory costing?

Explanation / Answer

Average cost of inventory
====================
Beginning Inventory      4,000 sheets @0.25       $1,000
Add: Purchases           21,000 sheets                 $5,460
Total                         25,000 sheets                  $6,460
Average cost             $6,460 / 25,000       =     $0.2584

Ending inventory (25,000 - 23,000) x $0.2584   $516.80

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