Question

During 2020, Stellar Furniture Company purchases a carload of wicker chairs. The manufacturer sells the chairs to Stellar for a lump sum of $137,655 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 920 $90 Armchairs 690 80 Straight chairs 1,610 50 During 2020, Stellar sells 460 lounge chairs, 230 armchairs, and 276 straight chairs. What is the amount of gross profit realized during 2020? What is the amount of inventory of unsold straight chairs on December 31, 2020? (Round cost per chair to 2 decimal places, e.g. 78.25 and final answer to 0 decimal places, e.g. 5,845.) Gross profit realized during 2020 $enter a dollar amount 27,232 Amount of inventory of unsold straight chairs $enter a dollar amount 42,021

Answer 1

The gross profit realized by Stellar Furniture Company during 2020 is $32,294 (rounded to zero decimal places), and the inventory value of unsold straight chairs on December 31, 2020, is $57,043 (rounded to two decimal places).

Step-by-step explanation:

To calculate the gross profit realized during 2020, we first need to determine the cost per chair type based on the lump sum purchase. Then, we multiply the number of each type of chairs sold by their respective estimated selling price to find total revenue. Finally, we subtract the total cost of chairs sold from the total revenue to determine the gross profit. For the inventory of unsold straight chairs, we subtract the number of straight chairs sold from the initial quantity and multiply by the cost per straight chair.

First, we calculate the cost per chair by dividing the lump sum cost by the total number of chairs:

Total number of chairs = 920 + 690 + 1610 = 3220 chairs

Cost per chair = $137,655 / 3220 = $42.76 (rounded to two decimal places)

Revenue from sales in 2020:

• Lounge chairs: 460 × $90 = $41,400
• Armchairs: 230 × $80 = $18,400
• Straight chairs: 276 × $50 = $13,800

Total revenue = $41,400 + $18,400 + $13,800 = $73,600

Cost of chairs sold in 2020:

• Lounge chairs: 460 × $42.76 = $19,669.60
• Armchairs: 230 × $42.76 = $9,834.80
• Straight chairs: 276 × $42.76 = $11,801.76

Total cost of chairs sold = $19,669.60 + $9,834.80 + $11,801.76 = $41,306.16 (rounded to two decimal places)

Gross profit = Total revenue - Total cost of chairs sold = $73,600 - $41,306.16 = $32,293.84 (rounded to zero decimal places)

Unsold straight chairs = Initial quantity - Sold quantity = 1610 - 276 = 1334 chairs

Inventory of unsold straight chairs = 1334 × $42.76 = $57,042.84 (rounded to two decimal places)

Answer 2

What is the amount of gross profit realized during 2020?

(460 x $33.30) + (230 x $29.60) + (276 x $18.50) = $27,232

What is the amount of inventory of unsold straight chairs on December 31, 2020?

[(920 - 460) x $56.70] + [(690 - 230) x $50.40] + [(1,610 - 276) x $31.50] = $26,082 + $23,184 + $42,021 = $91,287

Step-by-step explanation:

lump sum cost of chairs = $137,655

Type Chairs Selling Price Each Total

Lounge chairs 920 $90 $82,800

Armchairs 690 $80 $55,20

Straight chairs 1,610 $50 $80,500

total 3,220 $218,500

if we allocate costs based on resale, then each chair should cost:

Lounge chairs $90 x ($137,655 / $218,500) = $56.70

Armchairs $80 x ($137,655 / $218,500) = $50.40

Straight chairs $50 x ($137,655 / $218,500) = $31.50

contribution margin per chair:

Lounge chairs $90 - $56.70 = $33.30

Armchairs $80 - $50.40 = $29.60

Straight chairs $50 - $31.50 = $18.50