Erickson Company buys transformers from manufacturers and sells them to utility companies. The units are costly and the company keeps track of those using serial numbers. On April 1, the company had two transformers in stock:

Serial Number Unit Cost

2010901 .............$55,000

2010905 .............. 59,200

During the month, the company purchased the following two transformers:

Serial Number Unit Cost

20101001 .............$51,000

20101002 ............. 56,800

Erickson Company sold two transformers-serial numbers 2010905 and 20101002-during the month of April. The selling price of the transformers was $90,000 per unit.

Required

1. Erickson Company uses the specific-unit-cost method for costing inventory. Why would the company prefer to use this method?

2. Compute the gross margin for Erickson Company for the month of April.