Chapter 6, Problem 6.8E

(a)

To determine

In Average Cost Method the cost of inventory is priced at the average rate of the goods available for sale. Following is the mathematical representation to calculate the weighted-average cost:

$\text{Weighted-average Cost}=\frac{\text{Total Cost of Goods Available For Sale}}{\text{Total Number of Units Available For Sale}}$

To calculate: The cost of the ending inventory and cost of goods sold using average cost method.

(b)

To determine

Periodic Inventory System: It is a system in which the inventory is updated in the accounting records on a periodic basis such as at the end of each month, quarter or year. In other words, it is an accounting method which is used to determine the amount of inventory at the end of each accounting period.

In First-in-First-Out method, the cost of initially purchased items are considered as cost of goods sold, for the items which are sold first. The value of the ending inventory consists the recent purchased items.

In Last-in-First-Out method, the cost of last purchased items are considered as cost of goods sold, for the items which are sold first. The value of the closing stock consists the initial purchased items.

To identify: the results of (a) be higher or lower than the results under (1) FIFO and (2) LIFO.

(c)

To determine

To ascertain: The reason why the average unit cost were note as $6.