At may 1, 2014, Kibbec ComPany had beginning inventory consisting of 200 unils w

Question

At may 1, 2014, Kibbec ComPany had beginning inventory consisting of 200 unils with a unit cost of $7. During May, the company purchased inventory as follows. 800 units at $7 600 units at $8 The company sold 1.000 units during the month for $12 per unit. Ktbbee uses the average cost method. The value of Kibbee's inventory at May 31, 2014 is a. $3,000. b. $4,425. c. $4,500. d. $7,500. 27. At May 1, 2014, Kibbee Company had beginning inventory consisting of 200 units with a unit cost of $7. During May, the company purchased inventory as follows: 800 units at $7 600 units at $8 The company sold 1,000 units during the month for $12 per unit. Ktbbee uses the average cost method. Kibbce's gross profit for the month of May is a. $4,625. b. $4,571. c. $4,000. d. $4,500.

Explanation / Answer

To calculate the average cost per unit , the following steps are to be followed

Opening stock cost = 200 * $7 = $1400

Purchases in May = 800 * $ 7 = $ 5600

                                    = 600 * $8 = $ 4800

The total cost for 1600 units is $ 11,800 ( $1,400 +$5,600+$4,800)

Average cost per unit = $11,800 / 1600

                                        = $ 7.375

The closing inventory as on 31 may 2014 is total inventory minus sales which is 1600 units minus 1000 units of sale is 600 units as closing inventory

The closing inventory value will be closing inventory in units multiply by average cost per unit. which will be 600 x $7.375 is $4,425

2) To calculate the gross profit on sales . the following steps are used

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