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Problem - Marlow Company uses a perpetual inventory system. It entered into the following calendar-year 2009 purchases and sales transactions

Date Activities Units Acquired at Cost Units Sold at Retail

Jan. 1 Beginning inventory............ 770 units @ $50/unit

Feb. 10 Purchase............................... 420 units @ $41/unit

Mar. 13 Purchase.............................. 260 units @ $25/unit

Mar. 15 Sales..................................... 770 units @ $75/unit

Aug. 21 Purchase............................. 180 units @ $49/unit

Sept. 5 Purchase............................. 585 units @ $42/unit

Sept. 10 Sales..................................... 650 units @ $75 units

Totals................................... 2,215 units 1,420 units

REQUIRED -

1. Compute cost of goods available for sale and the number of units available for sale.

2. Compare the number of units in ending inventory.

3. Compute the cost assigned to ending inventory using (a) FIFO, (b)) LIFO, (c) specific identification - from the March 13 purchase, and 455 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 1.

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?

Accounting Basics, Accounting

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