Questions: Assume the perpetual inventory system is used. Required: 1. Compute gross profit for the month of January for Laker Company for the four inventory methods. 2. Which method yields the highest gross profit? 3. Does gross profit using weighted average fall between that using FIFO and LIFO? 4. If costs were rising instead of falling, which method would yield the highest gross profit? Complete this question by entering your answers in the tabs below. Req 1 Req 2 to 4 Compute gross profit for the month of January for Laker Company for the four inventory methods. Note: Round cost per unit to 2 decimal places and final answers to the nearest whole dollars. LAKER COMPANY For Month Ended January 31 Specific Identification Weighted Average FIFO LIFO --------------- Sales Cost of goods sold Gross profit

To address the requirements, we need to compute the gross profit for Laker Company using four different inventory methods: Specific Identification, Weighted Average, FIFO (First-In, First-Out), and LIFO (Last-In, First-Out). However, the question does not provide specific data such as sales revenue, cost of goods sold, or inventory details, which are necessary to perform these calculations. Therefore, I'll outline the general approach for each method and answer the subsequent questions based on typical outcomes of these methods.

1. Specific Identification: This method tracks the actual cost of each specific item sold. Gross profit is calculated by subtracting the cost of goods sold (COGS) from sales revenue, where COGS is determined by the specific cost of each item sold.

2. Weighted Average: This method calculates an average cost per unit by dividing the total cost of goods available for sale by the total units available for sale. Gross profit is then sales revenue minus COGS, where COGS is the average cost per unit multiplied by the number of units sold.

3. FIFO (First-In, First-Out): This method assumes that the oldest inventory items are sold first. COGS is calculated using the cost of the oldest inventory, and gross profit is sales revenue minus this COGS.

4. LIFO (Last-In, First-Out): This method assumes that the newest inventory items are sold first. COGS is calculated using the cost of the newest inventory, and gross profit is sales revenue minus this COGS.

Typically, in a period of falling prices, FIFO tends to yield the highest gross profit because it matches older, lower-cost inventory against current sales, resulting in lower COGS. Conversely, LIFO would yield the lowest gross profit as it matches newer, higher-cost inventory against sales.

Yes, generally, the gross profit using the weighted average method falls between that of FIFO and LIFO. This is because the weighted average smooths out price fluctuations over the period.

If costs were rising, FIFO would still yield the highest gross profit because it would continue to match older, lower-cost inventory against sales. LIFO would yield the lowest gross profit in this scenario, as it would match higher-cost inventory against sales.

• Req 1: Without specific data, we cannot compute exact gross profits, but the methods are outlined.
• Req 2: FIFO typically yields the highest gross profit in a period of falling prices.
• Req 3: Weighted average gross profit usually falls between FIFO and LIFO.
• Req 4: In rising cost scenarios, FIFO yields the highest gross profit.