Exercise 9-10 During 2017, Indigo Furniture Company purchases a carload of wicke

Question

Exercise 9-10

During 2017, Indigo Furniture Company purchases a carload of wicker chairs. The manufacturer sells the chairs to Indigo for a lump sum of $60,800 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 2017, Indigo sells 100 lounge chairs, 100 armchairs, and 100 straight chairs.

What is the amount of gross profit realized during 2017? What is the amount of inventory of unsold straight chairs on December 31, 2017? (Round cost per chair to 2 decimal places, e.g. 78.25 and final answer to 0 decimal places, e.g. 5,845.)

$

Type

No. of Chairs

Estimated Selling
Price Each

Lounge chairs 300 $90 Armchairs 200 80 Straight chairs 700 50

Explanation / Answer

SOLUTION

Gross profit realized = $5,002

Remaining inventory of unsold straight chairs = (700-100) * $38.97 = $23,382

Chairs No. of chairs (A) Sales price per chair ($) (B) Total sales Price ($) (C=A*B) Relative sales price (D) Total cost ($)(E) Cost allocated to chairs ($)(F=D*E) Cost per chair ($) (F/A) Lounge chairs 300 90 27,000 34.615% 60,800 21,046 70.15 Arm chairs 200 80 16,000 20.513% 60,800 12,472 60.86 Straight chairs 700 50 35,000 44.872% 60,800 27,282 38.97 78,000 60,800

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