Category Quantity Cost per Unit Total Cost Category Quantity Purchased Cost per

Question

Category

Quantity

Cost per Unit

Total Cost

Category

Quantity
Purchased

Cost per Unit

Quantity
Sold

Selling Price
per Unit

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Tony’s Televisions produces television sets in three categories: portable, midsize, and flat-screen. On January 1, 2017, Tony adopted dollar-value LIFO and decided to use a single inventory pool. The company’s January 1 inventory consists of:

Category

Quantity

Cost per Unit

Total Cost

Portable 5,900 $118 $ 696,200 Midsize 8,300 295 2,448,500 Flat-screen 3,000 472 1,416,000 17,200 $4,560,700
During 2017, the company had the following purchases and sales.

Category

Quantity
Purchased

Cost per Unit

Quantity
Sold

Selling Price
per Unit

Portable 14,600 $130 13,700 $177 Midsize 20,700 354 23,500 478 Flat-screen 10,000 590 5,900 708 45,300 43,100 Calculate price index. (Round price index to 4 decimal places, e.g. 1.4562.)
Price index

Compute ending inventory, cost of goods sold, and gross profit. (Round answers to 0 decimal places, e.g. 6,548.)
Ending inventory $

Cost of goods sold $

Gross profit $

Assume the company uses three inventory pools instead of one. Compute ending inventory, cost of goods sold, and gross profit. (Round price index to 6 decimal places, e.g. 1.456287 and final answers to 0 decimal places, e.g. 6,548.)
Ending inventory $

Cost of goods sold $

Gross profit $

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Explanation / Answer

1. Single inventory pool:

Price index-

Price index = Current cost / Base cost = 7020000/5776100 = 1.2154

Ending inventory at base cost increased by = 5776100 - 4560700 = $1,215,400

Ending inventory value = 4560700 + 1215400*1.2154 = $5,560,700

Cost of goods sold = Beginning inventory + Purchases - Ending Inventory = 4560700 + 15125800 - 5560700 = $14,125,800

Gross Profit = Sales - Cost of goods sold = 17835100 - 14125800 = $3,709,300

2. Three inventory pools:

Index for portable = 130 / 118 = 1.1

Index for midsize = 354 / 295 = 1.2

Index for flat-screen = 590 / 472 = 1.25

Cost of goods sold = Beginning inventory + Purchases - Ending inventory = 4560700 + 15125800 - 7096520 = $12,589,980

Gross Profit = Sales - Cost of goods sold = 17835100 - 12589980 = $5,245,120

Category Ending inventory units Base price Base cost Current price Current cost Portable 6,800 118 802,400 130 884,000 Midsize 5,500 295 1,622,500 354 1,947,000 Flat-screen 7,100 472 3,351,200 590 4,189,000 5,776,100 7,020,000

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