Oriole Corporation acquired two inventory items at a lump-sum cost of $87000. Th

Question

Oriole Corporation acquired two inventory items at a lump-sum cost of $87000. The acquisition included 2730 units of product CF, and 5460units of product 3B. CF normally sells for $30 per unit, and 3B for $10 per unit. If Oriole sells 910 units of CF, what amount of gross profit should it recognize?

$5500.

Carla Vista Corporation acquired two inventory items at a lump-sum cost of $127000. The acquisition included 3210 units of product LF, and 6420 units of product 1B. LF normally sells for $30 per unit, and 1B for $10 per unit. If Carla Vista sells 1070 units of LF, what amount of gross profit should it recognize?

$6700.

Given the historical cost of product Dominoe is $32, the selling price of product Dominoe is $37, costs to sell product Dominoe are $3, the replacement cost for product Dominoe is $33, and the normal profit margin is 40% of sales price, what is the cost amount that should be used in the lower-of-cost-or-market comparison?

$3300.

Explanation / Answer

SOLUTION

1.Gross Profit = $9,900

Weight of CF = $81,900 / $136,500 = 60%

Cost allocated to CF = $87,000 * 60% = $52,200

Unit cost of CF = $52,200 / 2,730 = $19.12

Gross profit = Sales price - Cost

= (910 * $30) - (910 * $19.12)

= $9,900

Amount ($) Sales value of product CF (2,730 *$30) 81,900 Sales value of product 3B (5,460 * $10) 54,600 Total 136,500

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