Calculating Ending Inventory in both units & dollars, Cost of Goods sold, Commission to Manager & Gross Profit for the given period.
Parker Company uses a perpetual inventory system. It entered into the following calendar-year 2005 purchases and sales transactions:
|
Date
|
Activities
|
Units Aquired at Cost
|
Units sold at retail
|
|
Jan. 1
|
Beginning inventory
|
600 units @ $44/unit
|
|
|
Feb. 10
|
Purchase
|
200 units @ $40/unit
|
|
|
Mar. 13
|
Purchase
|
100 units @ $20/unit
|
|
|
Mar. 15
|
Sales
|
|
400 units @ $75/unit
|
|
Aug. 21
|
Purchase
|
160 units @ $60/unit
|
|
|
Sept. 5
|
Purchase
|
280 units @ $48/unit
|
|
|
Sept. 10
|
Sales
|
|
200 units @ $75/unit
|
|
|
Totals
|
1,340 Units
|
600 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
(Note: The units sold consist of 500 units from beginning inventory and 100 units from the
March 13 purchase), and (d) weighted average.
4. Compute the 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?