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

620

units

@ $45 per unit

Feb.

10

Purchase

310

units

@ $42 per unit

Mar.

13

Purchase

120

units

@ $30 per unit

Mar.

15

Sales

770

units

@ $85 per unit

Aug.

21

Purchase

190

units

@ $50 per unit

Sept.

5

Purchase

520

units

@ $48 per unit

Sept.

10

Sales

710

units

@ $85 per unit

Totals

1,760

units

1,480

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 620 units from beginning inventory, 210 from the February 10 purchase, 120 from the March 13 purchase, 140 from the August 21 purchase, and 390 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 companys manager earns a bonus based on a percent of gross profit. Which method of inventory costing produces the highest bonus for the manager?

• LIFO

• Weighted Average

• Specific Identification

• FIFO