During 2014, Pretenders Furniture Company purchases a carload of wicker chairs.
ID: 2475731 • Letter: D
Question
During 2014, Pretenders Furniture Company purchases a carload of wicker chairs. The manufacturer sells the chairs to Pretenders for a lump sum of $68,000 because it is discontinuing manufacturing operations and wishes to dispose of its entire stock. Three types of chairs are included in the carload. The three types and the estimated selling price for each are listed below.
Type
No. of Chairs
Estimated Selling
Price Each
During 2014, Pretenders sells 140 lounge chairs, 110 armchairs, and 110 straight chairs.
What is the amount of gross profit realized during 2014? What is the amount of inventory of unsold straight chairs on December 31, 2014?
Type
No. of Chairs
Estimated Selling
Price Each
Explanation / Answer
53,144
Inventory value of unsold straight chairs=$21,900
Pretenders Furniture Assuming the cost of the chairs are in the same weight of sales Value Calculation Type of chairs No of chairs Selling Price/unit Sales value % Weight Sales value Cost on the basis of % sale value Unit Cost Lounge chairs 600 122 73,200 43.88% 29,842 49.74 Armchairs 300 108 32,400 19.42% 13,209 44.03 Straight chairs 900 68 61,200 36.69% 24,950 27.72 Total 1,800 166,800 68,000 Goss Profit Calculation Type of chairs No of chairs sold Selling Price/unit Sales Revenue Unit Cost Total Cost Gross Profit Lounge chairs 140 122 17,080 49.74 6,963 10,117 Armchairs 110 108 11,880 44.03 4,843 7,037 Straight chairs 110 68 7,480 27.72 3,049 4,431 Total 360 36,440 14,856 21,584 So gross Profit in 2014=$21,584 Inventory Unsold Dec 31.2014. Type of chairs No of chairs sold Unit Cost Inventory Value Lounge chairs 460 49.74 22,879 Armchairs 190 44.03 8,365 Straight chairs 790 27.72 21,900 Total 1,440 53,144 So Inventory value of unsold chairs on Dec 31.2014.=53,144
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