Ethics Case 8-7 West (1) - 1 Ethics Case 8-7 Elizabeth A...

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1 Ethics Case 8-7 Elizabeth A. West Liberty University
2 In 2012 the Moncrief Company purchased from Jim Lester the right to be the sole distributor in the western states of a product called Zelenex. In payment, Moncrief agreed to pay Lester 20% of the gross profit recognized from the sale of Zelenex in 2013. Moncrief uses a periodic inventory system and the LIFO inventory method. Late in 2013, the following information is available concerning the inventory of Zelenex: Beginning Inventory 1/1/13 (10,000 Units @ $30) $300,000 Purchases (40,000 Units @ $30) $1,200,000 Sales (35,000 Units @ $60) $2,100,000 By the end of the year, the purchase price of Zelenex had risen to $40 per unit. On December 28, 2013, three days before year-end, Moncrief is in a position to purchase 20,000 additional units of Zelenex at the $40 per unit price. Due to the increase in purchase price, Moncrief will increase the selling price in 2014 to $80 per unit. Inventory on hand before the purchase, 15,000 units, is sufficient to meet the next six months' sales and the company does not anticipate any significant changes in purchase price during 2014.

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