The Bradley Corporation produces a product with the following costs as of July 1, 20X1: Material...

The Bradley Corporation produces a product with the following costs as of July 1, 20X1:

Material	$4 per unit
Labor	4 per unit
Overhead	2 per unit

Beginning inventory at these costs on July 1 was 3,500 units. From July 1 to December 1, 20X1, Bradley produced 13,000 units. These units had a material cost of $4, labor of $6, and overhead of $4 per unit. Bradley uses LIFO inventory accounting.

a. Assuming that Bradley sold 15,000 units during the last six months of the year at $19 each, what is its gross profit?

b. What is the value of ending inventory?

Solutions

Expert Solution

In case of LIFO method the inventory which are produced later are sold and the earlier one are kept at part of inventory

Therefore of the 15,000 units sold by the company 13,000 units would be sold from the units produced and 2,000 units from beginning inventory
The ending inventory units would be 1,500 (3500+13000-15000)
Formula to calculate gross profit
Gross Profit = Sales - Cost of goods sold

Computation of Gross profit is shown below
Sales (15000*19)			$285,000
Less : Cost of goods sold
From new inventory:
Quantity	13000
Cost per unit (4+6+4)	$14
Total		$182,000
From old inventory:
Quantity	2000
Cost per unit (4+4+2)	$10
Total		$20,000
Total cost of goods sold			$202,000
Gross Profit			$83,000

The gross profit of the company is $83,000

Computation of value of ending inventory
Ending inventory units	1500
Cost per unit (4+4+2)	$10
Value of inventory	$15,000

The value of ending inventory is $15,000

jeff jeffy answered 1 year ago

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