Question

Montoure Company uses a perpetual inventory system. It entered into the following calendar-year purchases and sales transactions. Units Sold at Retail Units Acquired at Cost 700 units @ $50 per unit 350 units @ $44 per unit 150 units @ $32 per unit Date Activities Jan. 1 Beginning inventory Feb. 10 Purchase Mar. 13 Purchase Mar. 15 Sales Aug. 21 Purchase Sept. 5 Purchase Sept. 10 Sales Totals 705 units @ $80 per unit 190 units @ $55 per unit 540 units @ $51 per unit 730 units @ $80 per unit 1,435 units 1,930 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) weighted average, and (d) specific identification. For specific identification, units sold consist of 700 units from beginning inventory, 250 from the February 10 purchase, 150 from the March 13 purchase, 140 from the August 21 purchase, and 195 from the September 5 purchase. (Round your average cost per unit to 2 decimal places.) 4. Compute gross profit earned by the company for each of the four costing methods. (Round your average cost per unit to 2 decimal places.)

Answer 1

Montoure Company

Cost of goods available for sale = Opening inventory + Purchases

= (700 units × $ 50 per unit) + (350 units × $ 44 per unit) + (150 units × $ 32 per unit) + (190 units × $ 55 per unit) + (540 units × $ 51 per unit)

= $ 93,190

No of units available for sale = 1,930 units

Ending inventory in units = No of units available for sale - sales

= 1,930 - 1,435 units = 495 units

Average cost = Cost of goods available for sale / no of units available for sale

= $ 93,190 / 1,930 units = $ 48.28 per unit

Ending inventory:

Sl no		Calculation
a	FIFO	495 units × $ 51 per unit	$ 25,245
b	LIFO	495 units × $ 50 per unit	$ 24,750
c	Weighted average	495 units × $ 48.28 per unit	$ 23,898.60
d	Spefic identification	(100 units × $ 44 per unit)+(50 units × $ 55 per unit)+(345 units × $ 51 per unit)	$ 24,745

Gross profit:

	FIFO	LIFO	Weighted average	Specific identification
Sales (1,435 units × $ 80 per unit)	$ 114,800	$ 114,800	$ 114,800	$ 114,800
Less : Costs of goods sold (Cost of goods available for sale - Ending inventory)	(93,190-25,245) ($ 67,945)	(93,190-24,750) ($ 68,440)	(93,190-23,898.60) ($ 69,291.40)	(93,190-24,745) ($ 68,445)
Gross profit	$ 46,855	$ 46,360	$ 45,508.60	$ 46,355