(Appendix) Inventory Costing. Token Company uses perpetual inventory costing for inventory Item 407, which it purchases for resale. The company began its operations on January 1 and is in the process of prepar¬ ing its first financial statements. LO2 The inventory ledger and other accounting records were examined, and the following information was gathered pertaining to the first four months of operations:

Purchases Sales Units Cost per Unit January2.

2,000

$5 January 15.

February2.

1,200 6

January 31 .

March2.

1,500 8

February 15 April2.

1,900 7

February 28 March 15.

March 31.

April 15.

April 30.

Units 500 700 600 900 600 800 700 700 Management has not decided which of the following three inventory costing methods should be selected:

(a) Average method

(b) First in, first out method

(c) Last in, first out method Required:

(1) Prepare an inventory record card for Item 407, using each of the methods mentioned. Carry all computa¬ tions to three decimal places.

(2) Prepare a comparative statement showing the effect of each method on gross profit. The sales price is $10 per unit.