Assume that you own a hat shop and one of your hats has the ATC emblem on it.

Unfortunately, the cost of ATC hat steadily went up and you're trying to figure out which inventory costing method to utilize for financial statements or tax purposes.

In January, you paid total $48 for 3 hats, purchased in three different times and the following is the cost of each hat.

Item: ATC hat

Purchasing Date unit Cost

Jan. 5 1 $13

Jan. 15 1 $15

Jan. 25 1 $20

Total 3 $48

Average cost per unit $16 ($48/3)