Question

Montoure Company uses a perpetual inventory system. It entered into the following calendar-year purchases and sales...

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 540 units @ $55 per unit
Feb. 10 Purchase 460 units @ $53 per unit
Mar. 13 Purchase 100 units @ $40 per unit
Mar. 15 Sales 745 units @ $80 per unit
Aug. 21 Purchase 170 units @ $61 per unit
Sept. 5 Purchase 430 units @ $54 per unit
Sept. 10 Sales 600 units @ $80 per unit
Totals 1,700 units 1,345 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 540 units from beginning inventory, 360 from the February 10 purchase, 100 from the March 13 purchase, 120 from the August 21 purchase, and 225 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 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?

  • LIFO

  • Specific Identification

  • FIFO

  • Weighted Average

rev: 02_07_2019_QC_CS-156418, 11_15_2019_QC_CS-190617

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Answer #1

Gross Profit = Sales - Cost of goods sold

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