During 2017, Martinez Furniture Company purchases a carload of wicker chairs. Th
ID: 2538147 • Letter: D
Question
During 2017, Martinez Furniture Company purchases a carload of wicker chairs. The manufacturer sells the chairs to Martinez for a lump sum of $56,800 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 Estimated Price Each $90 80 50 Selling Type Lounge chairs Armchairs Straight chairs No. of Chairs 300 300 600 During 2017, Martinez sells 200 lounge chairs, 100 armchairs, and 130 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) Gross profit realized during 2017 Amount of inventory of unsold straight chairs sExplanation / Answer
Answer
We will devide the cost in the total sales ratio.
Chairs
No. of Chairs
Sales price
Total Sales
Weight
Cost
Cost allocated
Cost per chair
Lounge Chair
300
90
27,000
33.3333%
(27,000/81,000)
56,800
18,933.33
63.111
Armchairs
300
80
24,000
29.6296%
(24,000/81,000)
56,800
16,829.63
56.099
Straight Chair
600
50
30,000
37.0370%
(30,000/81,000)
56,800
21,037.04
35.062
Total
81,000
100.00%
56,800.00
Chairs
No. of Chairs Sold
Sale price per chair
Total Sales
Cost per chair
Total Cost
Lounge Chair
200
90
18,000
63.111
12,622.20
Armchairs
100
80
8,000
56.099
5,609.90
Straight Chair
130
50
6,500
35.062
4,558.06
Total
32,500
22,790.16
Profit = Total Sales – Total Cost
= 32,500 – 22,790.16
Profit = $9,709.84
Amount of Inventory of Unsold Straight Chairs = Closing Stock of Straight Chairs * Cost per chair
= (600 - 130) * $35.062 per chair
Amount of Inventory of Unsold Straight Chairs = $16,479.14
Chairs
No. of Chairs
Sales price
Total Sales
Weight
Cost
Cost allocated
Cost per chair
Lounge Chair
300
90
27,000
33.3333%
(27,000/81,000)
56,800
18,933.33
63.111
Armchairs
300
80
24,000
29.6296%
(24,000/81,000)
56,800
16,829.63
56.099
Straight Chair
600
50
30,000
37.0370%
(30,000/81,000)
56,800
21,037.04
35.062
Total
81,000
100.00%
56,800.00
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