Question: Parker Company uses a perpetual inventory system. It entered into the following calendar-year 2005 buy and sales transactions:
|
Date
|
Activities
|
Units Acquired 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
[A] Calculate cost of goods available for sale & the number of units available for sale.
[B] Calculate the number of units in ending inventory.
[C] Calculate 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 & 100 units from the March 13 (C) purchase & (D) weighted average.
[D] Calculate the gross profit earned by the company for each of the four costing methods in part 3.
Analysis Component
[E] If the firm's manager earns a bonus based on a percent of gross profit, which method of inventory costing will the manager likely prefer?