The Bradley Corporation produces a product with the following costs as of July 1

Question

The Bradley Corporation produces a product with the following costs as of July 1, 20x1: $3 per unit 3 per unit 1 per unit Labor Beginning inventory at these costs on July 1 was 3,850 units. From July 1 to December 1, 20X1, Bradley produced 13,700 units. These units had a materiall cost of $5, labor of $4, and overhead of $5 per unit. Bradley uses LIFO inventory accounting. a. Assuming that Bradley sold 16,400 units during the last six months of the year at $19 each, what is its gross profit? b. What is the value of ending inventory? 62

Explanation / Answer

Sales = 16,400 units * 19 per unit = 311,600

Beginning inventory cost per unit = Material + Labour + Overhead

= 3 + 3+ 1

= 7 per unit

Beginning inventory = 3,850 units * 7 per unit = 26,950

Cost of goods produced per unit = Materials + Labour + Overhead

= 5 + 4 + 5

= 14 per unit

16,400 units were sold during the period under LIFO inventory costing, units sold consists of 13,700 units produced during the period and 2,700 units (16,400-13,700) from beginning inventory

Cost of goods sold = (13,700*14) + (2,700*7) = 191,800 + 18,900 = 210,700

a.

Gross profit = Sales - Cost of goods sold

= 311,600 - 210,700

= 100,900

b.

Ending inventory = 3,850 - 2700 = 1,150

Value of ending inventory = 1,150 units * 7 per unit = 8,050

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