The firm uses the periodic system, and there are 20 units of the commodity on hand at the end of the year. What is the ending inventory balance at the end of the year rounded to nearest dollar according to the average cost method?

$1,263

Explanation:

                                          units        $ per unit           total $

beginning inventory            10                 $55              $550

first purchase                      25                 $60            $1,500  

second purchase                30                 $65            $1,950

third purchase                     15                  $70            $1,050

total                                    80              $63.125        $5,050

the price per unit using the average cost method = total cost / total units = $5,050 / 80 units = $63.125 per unit

since 20 units remained as ending inventory, the total cost of ending inventory = 20 units x $63.125 = $1,262.50 ≈ $1,263

b is the correct answer

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