Problem
Montoure Company uses a perpetual inventory system. It entered into the following calendar-year 2015 purchases and sales transactions. (For specific identification, units, sold consist of 600 units from beginning inventory, 300 from the February 10 purchase, 200 from the March 13 purchase, 50 from the August 21 purchase, and 250 from the September 5 purchase.
Date Activities Units Acquired at Cost Units Sold at Retail
Jan 1 Beginning Inventory 600 units @45.00 per unit
Feb. 10 Purchase 400 units @ $42.00 per unit
Mar. 13 Purchase 200 units @ $27.00 per unit
Mar. 15 Sales 800 units @ $75.00 per unit
Aug. 21 Purchase 100 units @ $50.00 per unit
Sept. 5 Purchase 500 units @ $46.00 per unit
Sept. 10 Sales 600 units @ $75 per unit
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. Weighted average, and D. Specific identification. Round all amounts to cents.
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?
I also get confused with identifying what are the cost of goods sold, sales, purchases and ending inventory. My professor gave us a formula to remember but when everything is on the table i get confused looking for which one are cogs, sales and ending inventory in order to solve for the gross profit. The formula he said will be useful is the Cogs = Beginning Inventory + Purchases - Ending Inventory. Please provide a step by step process as this is very confusing for me. Thank you.
On a separate note, how do I understand the concept behind Retail inventory method and Gross Profit Method.