Given the following data, calculate the cost of ending inventory using the average cost method. (Round any intermediary and final answers to two decimal places.)

Date Item Unit

1/1 Beginning Inventory 40 units at $30 per unit

3/5 Purchase of Inventory 20 units at $10 per unit

5/30 Purchase of Inventory 25 units at $22 per unit

12/31 Ending Inventory 20 units

(A) $413 (B) $459 (C) $200 (D) $550

(B) $459

Explanation:

For computing the average cost per unit is shown below:

= (Beginning inventory units * price per unit + purchase inventory units * price per unit + purchase inventory units * price per unit) : (Beginning inventory units + purchase inventory units + purchase inventory units)

= (40 units * $30 + 20 units * $10 + 25 units * $22) : (40 units + 20 units + 25 units)

= ($1,200 + $200 + $550 units) : (85 units)

= ($1,950 units) : (85 units)

= $22.94 per unit

Now the ending inventory would be

= Ending inventory units * average cost per unit

= 20 units * $22.18 per unit

= $458.82

The purchase units = 20 units + 20 units = 40 units