Crane Company uses the periodic inventory system. For the current month, the beginning inventory consisted of 483 units that cost $63 each. During the month, the company made two purchases: 723 units at $66 each and 362 units at $68 each. Crane Company also sold 1195 units during the month. Using the average cost method, what is the amount of ending inventory

$24,445.67

Explanation:

The average cost method calculates an average costs out of the units available for sale. The average cost is then used to value cost of sales and the inventory value.

Unit Cost = Total Cost ÷ Units available for sale

therefore,

Unit Cost = (483 x $63 + 723 x $66 + 362  x $68) ÷ 1,568

                = $65.538

Now,

Ending Inventory = Units in stock x Unit Cost

                             = (1,568 - 1,195) x $65.538

                             = $24,445.67

Using the average cost method, the amount of ending inventory is  $24,445.67.

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