Alternative cost flows—perpetual LO7
Aloha 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 700 units from beginning inventory, 500 units from the January 10 purchase,
220 units from the February 13 purchase, 200 units from the July 21 purchase, and 30 units from the
August 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,
$31,475; LIFO, $29,425;
WA, $30,663;
(4) LIFO gross profit, $54,170
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