Question

During 2020, Cheyenne Furniture Company purchases a carload of wicker chairs. The manufacturer sells the chairs to Cheyenne for a lump sum of $83,790 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
Lounge chairs		560		$90
Armchairs		420		80
Straight chairs		980		50

During 2020, Cheyenne sells 280 lounge chairs, 140 armchairs, and 168 straight chairs.

What is the amount of gross profit realized during 2020? What is the amount of inventory of unsold straight chairs on December 31, 2020? (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 2020

Answer 1

Cost allocation:
Product		Units	Price	Estimated	% Of total	Cost	Allocated cost	Cost per unit
				Sales value
laonge chairs	560	90	50400	37.89%	83790	31,752	56.7
Arm chairs	420	80	33600	25.26%	83790	21,168	50.4
Staright chairs	980	50	49000	36.84%	83790	30,870	31.5
				133000	100.00%	83790	83,790
Gross Profit
Product		Unit sold	Price	Cost per unit	GP per unit	Total GP
laonge chairs	280	90	56.7	33.3	9324
Arm chairs	140	80	50.4	29.6	4144
Staright chairs	168	50	31.5	18.5	3108
				Total Gross Profits	16576
Value of Ending inventory
Product		Units Produced	Units sold	Ending	Cost per unt	Ending inventory
					Inventory
laonge chairs	560		280	280	56.7	15876
Arm chairs	420		140	280	50.4	14112
Staright chairs	980		168	812	31.5	25578
					Ending inventory	55566
Ending inventory of Straight chairs: $ 25,578