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Which cost flow method should quality diamonds select

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Reference no: EM132662385

Quality Diamonds carries only one brand and size of diamonds - all are identical. Each of the batch of diamonds purchased is carefully coded and marked with its purchase cost. The following data are available.

March 1. Opening Inventory, 150 diamonds at a cost of $300 per diamond

March 3. Purchased 200 diamonds at a cost of $350 Each

March 5. Sold 180 diamonds for $600 each

March 10. Purchased 350 diamonds at a cost of $375 each.

March 25. Sold 500 diamonds for $650 each.

Problem (a) Assume that Quality Diamonds use the specific identification cost flow method.

  1. Demonstrate how Quality Diamonds could maximize its gross profit for the month by selecting which diamonds to sell on March 5 and March 25
  2. Demonstrate how Quality Diamonds could minimize its gross profit for the month by selecting which diamonds to sell on March 5 and March 25.

Problem (b) Assume that Quality Diamonds use the weighted average cost flow assumption and a periodic inventory method. How much gross profit would Quality Diamonds report under this cost flow assumption?

Problem (c) Who are the stakeholders in this situation? Is there anything unethical in choosing which diamonds to sell in a month?

Problem (d) Which cost flow method should Quality Diamonds select?

Reference no: EM132662385

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