Question

During 2017, Cheyenne Furniture Company purchases a carload of wicker chairs. The manufacturer sells the chairs to Cheyenne for a lump sum of $54,400 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 300 $90

Armchairs 300 80

Straight chairs 800 50

During 2017, Cheyenne sells 200 lounge chairs, 120 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.)

Gross profit realized during 2017

$

Amount of inventory of unsold straight chairs

$

Answer 1

First of all, we need to calculate the cost allocated to each group of chairs by using estimated selling price of each group as per the following table
Calculations	A	B	C = A x B	D = C / Total	E = $54400 x D	F = E / A
	No. of Chairs	Estimated Selling	Estimated	Percentage	Cost allocation	Cost per
Particulars		Price Each	Sales value	of total		Chair
Lounge chairs	300	90	27000	29.67%	16140.66	53.80
Armchairs	300	80	24000	26.37%	14347.25	47.82
Straight chairs	800	50	40000	43.96%	23912.09	29.89
		Total	91000		54400.00
Calculations	A	B	C	D = B x C	E	F = C x E	G = A - C	H = E x G	I = D - F
	Total No. of Chairs	Estimated Selling	Sales	Sales	Cost per unit	Total cost	Closing	Closing	Gross profit
Particulars		Price Each	quantity	Value		of sold chairs	Inventory quantity	Inventory value
Lounge chairs	300	90	200	18000	53.8	10760	100	5380	7240
Armchairs	300	80	120	9600	47.82	5738.4	180	8607.6	3861.6
Straight chairs	800	50	120	6000	29.89	3586.8	680	20325.2	2413.2
		Total	440	33600		20085.2		34312.8	13514.8
So, Gross profit realized during 2017 is $ 13514.8 and amount of inventory of unsold straight chairs is $20325.2