The average cost method allocates the cost of goods available for sale on the basis of the weighted average unit cost incurred. The average cost method assumes that goods are similar in nature. When the average cost method is used in a perpetual inventory system, the business computes a new weighted average cost per unit after each purchase. This unit cost is then used to determine the cost of each sale until another purchase is made and a new average is computed. Ending inventory and cost of goods sold are then based on the same average cost per unit. The correct answer is A.