Brett Company sells personal computers and uses the specific identification method to account for its inventory. On 2010 November 30, the company had 46 Orange III personal computers on hand that were acquired on the following dates and at these stated costs:
|
Units |
Unit cost |
|
|
3-Jul |
10 |
@ $10,080 |
|
10-Sep |
20 |
@ $ 9,600 |
|
29-Nov |
16 |
@ $10,700 |
Brett sold 36 Orange III computers at USD 12,720 each in December. There were no purchases of this model in December.
a. Compute the gross margin on December sales of Orange III computers assuming the company shipped those units that would maximize reported gross margin.
b. Repeat part (a) assuming the company shipped those units that would minimize reported gross margin for December.
c. In view of your answers to parts (a) and (b), what would be your reaction to an assertion that the specific identification method should not be considered an acceptable method for costing inventory?