Question

Aloha Company uses a perpetual inventory system. It entered into the following calendar-year purchases and sales transactions. (For specific identification, the May 9 sale consisted of 80 units from beginning inventory and 100 units from the May 6 purchase; the May 30 sale consisted of 200 units from the May 6 purchase and 100 units from the May 25 purchase.)

Date	Activities	Units acquired at cost	Units sold at retail
May 1	Beginning inventory	150 units @ \(300.00 per unit
May 6	Purchase	350 units @ \)350.00 per unit
May 9	Sales		180 units @ \(1,200.00 per unit
May 17	Purchase	80 units @ \)450.00 per unit
May 25	Purchase	100 units @ \(458.00 per unit
May 30	Sales		300 units @ \)1,400.00 per unit
		680 units	480 units

Required

Compute gross profit earned by the company for each of the four costing methods in part 3.

Short answer

FIFO	$475,500
LIFO	$449,200
Weighted Average	$462,300
Specific Identification	$461,200

Step-by-step solution

Definition of Costing Method

The approach used by the business entity for collecting and reporting the information related to the cost of the business entity is known as the costing method.

Calculation of gross profit earned under each method

Calculation of cost of goods sold:

Particular	FIFO	LIFO	Weighted Average	Specific Identification
Cost of goods available for sale	$249,300	$249,300	$249,300	$249,300
Less: Ending Inventory	(88,800)	(62,500)	(75,600)	(74,500)
Cost of goods sold	$160,500	$186,800	$173,700	$174,800

Calculation of Gross Profit:

Particular	FIFO	LIFO	Weighted Average	Specific Identification
Sales$\left[\left(180\times 1,200\right)+\left(300\times 1,400\right)\right]$	$636,000	$636,000	$636,000	$636,000
Less: Cost of goods sold	(160,500)	(186,800)	(173,700)	(174,800)
Gross profit	$475,500	$449,200	$462,300	$461,200