Marlow Company uses a perpetual inventory system. It entered into the following calendar-year 2011 purchases and sales transactions.
Units Acquired at Cost
Units Sold at Retail
600 units @ $44/unit
200 units @ $40/unit
100 units @ $20/unit
400 units @ $75/unit
200 units @ $75/unit
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
(c) specific identification—units sold consist of 500 units from beginning inventory and 100 units from the March 13 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 3.
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?