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Problem 5-3A Perpetual: Alternative cost flows LO P1 Montoure Company uses a perpetual inventory system. It...

Problem 5-3A Perpetual: Alternative cost flows LO P1

Montoure Company uses a perpetual inventory system. It entered into the following calendar-year purchases and sales transactions

Date Activities Units Acquired at Cost Units Sold at Retail
Jan. 1 Beginning inventory 600 units @ $35 per unit
Feb. 10 Purchase 300 units @ $32 per unit
Mar. 13 Purchase 150 units @ $20 per unit
Mar. 15 Sales 725 units @ $80 per unit
Aug. 21 Purchase 190 units @ $40 per unit
Sept. 5 Purchase 540 units @ $37 per unit
Sept. 10 Sales 730 units @ $80 per unit
Totals 1,780 units 1,455 units


Required:
1. Compute cost of goods available for sale and the number of units available for sale.



2. Compute the number of units in ending inventory.



3. Compute the cost assigned to ending inventory using (a) FIFO, (b) LIFO, (c) weighted average, and (d) specific identification. For specific identification, units sold consist of 600 units from beginning inventory, 200 from the February 10 purchase, 150 from the March 13 purchase, 140 from the August 21 purchase, and 365 from the September 5 purchase.



4. Compute gross profit earned by the company for each of the four costing methods. (Round your average cost per unit to 2 decimal places.)



5. The company’s manager earns a bonus based on a percent of gross profit. Which method of inventory costing produces the highest bonus for the manager?

  • Weighted Average

  • FIFO

  • Specific Identification

  • LIFO

Solutions

Expert Solution

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ekkarill92 answered 2 years ago
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