Accounting help

Question

Hello, I need help with this problem. I am bit confused with the steps for the last question and for finding the weighted average and specific indentification.

 

PROBLEM:

 

Montoure Company uses a perpetual inventory system. It entered into the following calendar-year 2013 purchases and sales transactions.

Date       Activities                  Units Acquired at Cost        Units Sold at Retail
Jan. 1       Beginning inventory     600 units @ $ 40 /unit
Feb. 10     Purchase                    360 units @ $ 37 /unit
Mar. 13     Purchase                    150 units @ $ 25 /unit
Mar. 15     Sales                                                                       765 units @ $ 80 /unit
Aug. 21    Purchase                     200 units @ $ 45 /unit
Sept. 5     Purchase                     580 units @ $ 42 /unit
Sept. 10   Sales                                                                       780 units @ $ 80 /unit

Totals                                                1,890 units                                1,545 units

 

 

QUESTION:

1. 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 600 units from beginning inventory, 260 from the February 10 purchase, 150 from the March 13 purchase, 150 from the August 21 purchase, and 385 from the September 5 purchase. (Round your average cost per unit to 2 decimal places.)

 

Ending Inventory
(a) FIFO - $14,490 (I calculated this answer)
(b) LIFO - $13,800 (I calculated this answer)
(c) Weighted average - ??? (I can't seem to get this one right)
(d) Specific identification - ??? (I am not finding this one either)


2. Compute gross profit earned by the company for each of the four costing methods. (Round your average cost per unit to 2 decimal places.)

 

                                             FIFO       LIFO           Weighted Average          Specific Identification
Sales
Less: Cost of goods sold
Gross profit

Answer 1

Since it is clear that you understand the differences between the LIFO and FIFO methods, let me help you with your other questions, and then you will be able to complete question 2.

 

The weighted average is the sum of the individual values divided by the sum of the units. So, given the data here, we multiply the costs by the number of units for each of the purchases, and then divide by the total number of units.

 

[(600·$40) + (360·$37) + (150·$25) + (200·$45) + (580·$42)] divided by 1890 units

 

The specific identification units sold means that you identify which units were sold from the inventory purchased on a given date. When you look at the units sold on March 15, you will need to identify units came from the prior purchases. That evaluation will depend on the use of LIFO or FIFO policies.