Question

During 2020, Monty Furniture Limited purchased a railway carload of wicker chairs. The manufacturer of the chairs sold them to Monty for a lump sum of $58,600, because it was discontinuing manufacturing operations and wanted 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 as follows:

Type		No. of Chairs			Estimated Selling Price per Chair
Lounge chairs		470			$93
Straight chairs		640			53
Armchairs		370			83

Monty estimates that the costs to sell this inventory would be $4 per chair. During 2020, Monty sells 390 lounge chairs, 270 armchairs, and 150 straight chairs, all at the same prices as estimated. At December 31, 2020, the remaining chairs were put on sale: the lounge chairs at 25% off the regular price, the armchairs at 30% off, and the straight chairs at 40% off. All were expected to be sold at these prices.

What is the total cost of the chairs remaining in inventory at the end of 2020, using the relative sales value method?

Answer 1

Chairs	No. of Chairs	Sale Price per Chair	Total Sales Price	Relative Sales Price	Total Cost	Cost Allocated to Chair	Cost per Chair
		$	$		$
				( Total Sales price / No. of Chairs )		( Total Cost / Relative Sales Price )	( Cost Allocated * No. of Chairs )
Lounge Chairs	470	93	43710	0.40	58,600	23,642	50.30
Straight Chairs	640	53	33920	0.31	58,600	18,347	28.67
Armchairs	370	83	30710	0.28	58,600	16,611	44.89
Totals			108340			58,600.00
Chairs	Number of Chairs Sold	Closing Inventory	Cost per Chair	Cost of Remaining Chairs
		( Total Number of chairs - Number of Chairs sold )		( Closing Inventory * Cost per Chair )
Lounge Chairs	390	80	50.3	4024
Straight Chairs	150	490	28.67	14048.3
Armchairs	270	100	44.89	4489
Totals				22561.3
Cost of Remaining Chairs = $ 22,561.30