I don't think that the report should have reported a value of 1.25 for the unit cost - it really should be 1.00. I processed a receipt and a shipment in a similar fashion as you indicated and saw that the unit cost on the report doesn't calculate with the correct values for the qty and total cost as of a date between the receipt and shipment dates.

We'll have to take a look at the report. The Quantity on Hand and Total Cost amounts are correct, if that helps your auditing situation.