Problem 8-8 Category Quantity Cost per Unit Total Cost Category Quantity Purchas
ID: 2569224 • Letter: P
Question
Problem 8-8
Category
Quantity
Cost per Unit
Total Cost
Category
Quantity
Purchased
Cost per Unit
Quantity
Sold
Selling Price
per Unit
Problem 8-8
Alan’s Televisions produces television sets in three categories: portable, midsize, and flat-screen. On January 1, 2017, Alan adopted dollar-value LIFO and decided to use a single inventory pool. The company’s January 1 inventory consists of:Category
Quantity
Cost per Unit
Total Cost
Portable 6,200 $124 $ 768,800 Midsize 7,900 310 2,449,000 Flat-screen 3,100 496 1,537,600 17,200 $4,755,400During 2017, the company had the following purchases and sales.
Category
Quantity
Purchased
Cost per Unit
Quantity
Sold
Selling Price
per Unit
Explanation / Answer
(a) Calculate Price Index
Price Index = Total Current Cost / Total Base Cost
...................= $6,755,200 / $5,567,600
...................= 1.2133
(b) Compute ending inventory, cost of goods sold, and gross profit.
Ending Inventory at base cost increased by $812,200 i.e. ($5,567,600 - $4,755,400)
Total Purchase = (15,200 x $136) + (19,900 x $372) + (9,700 x $620)
.........................= $15,484,000
Total Sales = (14,400 x $186) + (23,200 x $502) + (6,200 x $744)
..................= $18,937,600
Ending Inventory under $ value LIFO = $4,755,400 + ($812,200 x 1.2133)
............................................................= $5,740,842
Cost of Goods Sold = $4,755,400 + $15,484,000 - $5,740,842
................................= $14,498,558
Gross Profit = $18,937,600 - $14,498,558
....................= $4,439,042
(c) Assume the company uses three inventory pools instead of one. Compute ending inventory, cost of goods sold, and gross profit
Ending Inventory = $7,034,200
Cost of Goods Sold = $4,755,400 + $15,484,000 - $7,034,200
................................= $13,205,200
Gross Profit = $18,937,600 - $13,205,200
....................= $5,732,400
Ending Inventory Base Price Base Cost Current Price Currect Cost Portable 7000 $124 $868,000 $136 $952,000 Midsize 4600 $310 $1,426,000 $372 $1,711,200 Flat-screen 6600 $496 $3,273,600 $620 $4,092,000 Total $5,567,600 $6,755,200