Alternative cost flows—perpetual LO7 Montoure Company uses a perpetual inventory system...

Alternative cost flows—perpetual LO7

Montoure Company uses a perpetual inventory system. It entered into the following calendar-year 2010 purchases and sales transactions.

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) specific identification—

units sold consist of 500 units from beginning inventory, 300 from the February 10 purchase, 200

from the March 13 purchase, 50 from the August 21 purchase, and 200 from the September 5 purchase,

and (d) weighted average. (Round per unit costs to three decimals, but inventory balances to

the dollar.)

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

5. If the company’s manager earns a bonus based on a percent of gross profit, which method of inventory

costing will the manager likely prefer?

Check (3) Ending inventory: FIFO,

$27,570; LIFO, $27,000;

WA, $26,422;

(4) LIFO gross profit, $40,680