Chapter 6, Problem 4AP

Perpetual: Alternative cost flows P1

Montoure Company uses a perpetual inventory system. It entered into the following calendar-year purchases and sales transactions. (For specific identification, units sold consist of 600 units from beginning inventory, 300 from the February 10 purchase, 200 from the March 13 purchase. 50 from the August 21 purchase, and 250 from the September 5 purchase.)

Date	Activities	Units Acquired at Cost	Units Sold at Retail
Jan. 1	Beginning inventory	600 units @ $45.00 per unit
Feb. 10	Purchase	400 units @ $42.00 per unit
Mar. 13	Purchase	200 units @ $27.00 per unit
Mar. 15	Sales		800 units # $75.00 per unit
Aug. 21	Purchase	100 units @ $50.00 per unit
Sep. 5	Purchase	500 units @ $46.00 per unit
Sep. 10	Sales		600 units # $75.00 per unit
	Totals	1,800 units	1,400 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. (Round all amounts to cents.)

4. Compute gross profit earned by the company for each of the four costing methods in part 3.

Analysis Component

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?

Problem 6-4A^A

Periodic: Alternative cost flows P3

Refer to the information in Problem 6-3A and assume the periodic inventory system is used.

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. (Round all amounts to cents.)

4. Compute gross profit earned by the company for each of the four costing methods in part 3.

Analysis Component

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