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?