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Under the perpetual average cost method, on 6/10 a merchandiser holds 9 units at $4 ($36) and buys 10 units at $5 ($50). What is the new average cost per unit on hand (rounded to the cent)?
A$4.00
B$4.53
C$5.00
D$5.39
Answer & Solution
Correct answer: B. $4.53
1. Combine the dollar value of stock on hand: $\$36 + \$50 = \$86$.
2. Combine the units on hand: $9 + 10 = 19$ units.
3. Average cost per unit = $\$86 / 19 = \$4.53$ (rounded).
4. Rule out $\$5.39$: that is the later average after the $6 purchase is added.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §4.1.1 "Perpetual Inventory System", p.118_
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