Question

Bing Corporation acquired two inventory items at a lump-sum cost of $120,000. The acquisition included 3,000 units of product LF, and 7,000 units of product 1B. LF normally sells for $30 per unit, and 1B for $10 per unit. If Bing sells 1,000 units of LF, what amount of gross profit should it recognize

Answer 1

Answer: $7,500

Step-by-step explanation:

3,000 units of LF normally costs:

= 3,000 * 30

= $90,000

7,000 units of 1B normally costs:

= 7,000 * 10

= $70,000

Together they cost:

= 90,000 + 70,000

= $160,000

Use this to calculate the proportional cost of LF from the lump sum:

= 90,000 / 160,000 * 120,000

= $67,500

Cost per unit of LF purchased at lump sum cost:

= 67,500 / 3,000 units

= $22.50

Gross profit:

= (Selling price - Cost per unit) * 1,000 units

= (30 - 22.50) * 1,000

= $7,500