Question

Exercise 9-10 Incorrect answer. Your answer is incorrect. Try again. During 2017, Oriole Furniture Company purchases a carload of wicker chairs. The manufacturer sells the chairs to Oriole for a lump sum of $60,700 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 400 $90 Armchairs 200 80 Straight chairs 700 50 During 2017, Oriole sells 200 lounge chairs, 100 armchairs, and 120 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.)

Answer 1

Solution:

Computation of Cost per chair - Oriole Furniture company
Particulars	Nos of chairs	Estimated selling price	Total estimated sales value	Proportion of sales	Cost allocated Proportionately	Cost per chair
Lounge Chairs	400	$90.00	$36,000.00	41.38%	$25,117.24	$62.79
Arm Chairs	200	$80.00	$16,000.00	18.39%	$11,163.22	$55.82
Straight Chairs	700	$50.00	$35,000.00	40.23%	$24,419.54	$34.89
			$87,000.00
As the purchase was made on lumpsum basis, therefor cost will be allocated in porportion to estimated sales value

Computation of Gross Profit
Type of Chair	Nos sold	Estimated selling price	Cost per chair	Profit / chair	Total Gross Profit
Lounge Chairs	200	$90.00	62.79	$27.21	$5,442
Arm Chairs	100	$80.00	55.82	$24.18	$2,418
Straight Chairs	120	$50.00	34.89	$15.11	$1,813
Total					$9,673

Computation of Ending inventory cost - Straight Chairs
Type of Chair	Nos of chairs in ending inventory	Cost per chair	Cost of ending inventory
Straight Chairs	580	$34.89	$20,236