Home › ACCA › Financial Accounting › Inventory Valuation › A company holds 30 identical units costing $60 i…
A company holds 30 identical units costing $60 in total (10 at $1, 10 at $2, 10 at $3). Using the average cost method, what is the cost of merchandise sold when one unit is sold?
A$1
B$2
C$3
D$4
Answer & Solution
Correct answer: B. $2
1. Average cost divides the total cost of stock by the number of units on hand.
2. Average cost per unit = $\$60 / 30 = \$2$.
3. The one unit sold is costed at the average, $\$2$.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §4.1 "Inventory", p.113_
Related questions
Correct ending inventory is $20,000, but a missed item causes only $19,500 to be reported.A company overstates its ending Merchandise Inventory. What is the combined effect on totaIf a company understates its ending Merchandise Inventory in the physical count, what is tGoods a company has sold are in transit on a carrier under shipping terms of FOB destinatiWhen a physical inventory count is taken, which item should be EXCLUDED from a company's cUnder IFRS, the comparison used to write inventory down when its value falls below cost isA company holds 200 units of a phone bought at $100 each whose current value has fallen toA company values inventory at lower of cost and net realisable value across four commoditi