Question

Larkin Corporation acquired two inventory items at a lump-sum cost of $120,000. The acquisition included 3,000 units of product LG and 7,000 units of product KB. LG normally sells for $30 per unit and KB for $10 per unit. If Larkin sells 1,000 units of LG, what amount of gross profit should it recognize? a. $20,000. b. $24,500. c. $2,500. d. $7,500.

Answer 1

d. $7,500

Step-by-step explanation:

The computation of the gross profit is shown below:

But before that following calculations need to be done

Tota sales are

= 3000 units × $30 + 7,000 units × $10

= $90,000 + $70,00 0

= $160,000

Now the weighted of LG is

= $90,000 ÷ $160,000 × $120,000

= $67,500

The unit cost would be

= $67,500 ÷ 3,000 units

= $22.5 per unit

Finally the gross profit is

= (Sales price - cost price) × number of units sold

= ($30 - $22.5) × 1,000

= $7,500

hence, the correct option is d. $7,500