Chapter 8, Problem 8.7BYP

1.

To determine

Periodic Inventory System:

Under this system, the balance of the merchandise inventory is not adjusted when the purchases and sales takes place rather it is adjusted at the end of a particular period on a periodic basis.

Last-In-First-Out (LIFO):

Under this inventory method, the units that are purchased last are sold first. Thus, it starts from the selling of the units recently purchased and ending with the beginning inventory.

Gross Profit:

Gross profit refers to the difference between the sales and the cost of goods sold.

To determine: The effect of the purchase of the additional 20,000 units on the 2016 gross profit from the sale of Z Product and the payment due to Company J.

2.

To determine

To Discuss: The ethical dilemma that Company M faces in determining whether or not the additional units should be purchased.