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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 660 units @ $60 per unit
Feb. 10 Purchase 330 units @ $57 per unit
Mar. 13 Purchase 110 units @ $45 per unit
Mar. 15 Sales 715 units @ $70 per unit
Aug. 21 Purchase 160 units @ $65 per unit
Sept. 5 Purchase 570 units @ $61 per unit
Sept. 10 Sales 730 units @ $70 per unit
Totals 1,830 units 1,445 units

Compute the cost assigned to ending inventory using weighted average, and specific identification. For specific identification, units sold consist of 660 units from beginning inventory, 230 from the February 10 purchase, 110 from the March 13 purchase, 110 from the August 21 purchase, and 335 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?

  • Specific Identification

  • LIFO

  • Weighted Average

  • FIFO

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Answer #1

Requirement 1 | Specific Identification Method Goods Purchased Date Unit Activity Units Cost Jan. 1 Beginning Inventory 660 $Requirement 2 | Ending Inventory, COGS - Weighted Average Cost Goods Purchased Cost of goods sold Date Units Price Total UnitRequirement 3 | Ending Inventory, COGS - FIFO Under FIFO Method, the goods which are brought first are sold first. Goods PurcRequirement 4 | Ending Inventory, COGS - LIFO Under FIFO Method, the goods which are brought first are sold first. Goods Purc

FIFO Method has the Highest Gross Profit Ratio. So, FIFO Metho produces the highest bonus for the Manager.

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