Question

During 2025, Splish Furniture Company purchases a carload of wicker chairs. The manufacturer sells the chairs to Splish for a lump sum of $173,565 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 1.160 $90
Armchairs 870 80
Straight chairs 2,030 50

During 2025, Splish sells 580 lounge chairs, 290 armchairs, and 348 straight chairs.

What is the amount of gross profit realized during 2025?
Gross profit realized during 2025 $ __________

Answer 1

The amount of gross profit realized during 2025 by Splish Furniture Company is $40,735.86, calculated by subtracting the weighted average cost of goods sold from the total sales revenue of the chairs sold.

Step-by-step explanation:

To calculate the gross profit realized by Splish Furniture Company during 2025, we need to determine the sales revenue from the chairs sold and subtract the cost of the chairs. First, we calculate the sales revenue from each type of chair sold:

• Lounge chairs: 580 chairs × $90 = $52,200
• Armchairs: 290 chairs × $80 = $23,200
• Straight chairs: 348 chairs × $50 = $17,400

Add these amounts together to get total sales revenue:

$52,200 (Lounge chairs) + $23,200 (Armchairs) + $17,400 (Straight chairs) = $92,800

Next, we calculate the cost of goods sold (weighted average cost per chair) since the chairs were sold for a lump sum:

Total Cost / Total Number of Chairs = $173,565 / (1,160 + 870 + 2,030) = $173,565 / 4,060 = $42.73 per chair

Cost of goods sold is the weighted average cost multiplied by the number of chairs sold:

$42.73 per chair × (580 + 290 + 348) chairs = $42.73 × 1,218 chairs = $52,064.14

Last step, subtract the cost from the sales revenue to find gross profit:

$92,800 (Sales revenue) - $52,064.14 (Cost) = $40,735.86 gross profit