Venus Company uses a perpetual inventory system. It entered into the following calendar-year 2011 purchases and sales transactions.
Date | Activities | Units Acauired at Cost | Units Sold at Retail |
Jan. 1 | Beginning inventory | 600 units @ $55/unit |
|
Jan. 10 | Purchase | 450 units @ $56/unit |
|
Feb. 13 | Purchase | 200 units @ $57/unit |
|
Feb. 15 | Sales |
| 430 units @ $90/unit |
July 21 | Purchase | 230 units @ $58/unit |
|
Aug. 5 | Purchase | 345 units @ $59/unit |
|
Aug. 10 | Sales |
| 335 units @ $90/unit |
Total | 1,825 units | 765 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) specific identification— units sold consist of 600 units from beginning inventory and 165 units from the February 13 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.
Analysis Component
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?
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