Question

During 2020, Vaughn Furniture Company purchases a carload of wicker chairs. The manufacturer sells the chairs to Vaughn for a lump sum of $131,670 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 880 $90
Armchairs 660 80
Straight chairs 1,540 50
During 2020, Sarasota sells 440 lounge chairs, 220 armchairs, and 264 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?

Answer 1

Answer:Gross profit realized during 2020 =$30,899

amount of inventory of unsold straight chairs on December 31, 2020 =$63,800

Explanation:

A)Vaughn Furniture Company purchases a carload of wicker chairs at a cost of a lump sum of $131,670 in 2020

Now the  total number of chairs purchased per type is;

Lounge chairs 880

Armchairs        660  

Straight chairs 1,540

   Total =          3,080 chairs purchased

Also, Vaughn sells

440 Lounge chairs  at $90 each = 440 x 90=$39,600

220 Armchairs  at $80 each= 220 x 80 =$ 17600

264 Straight chairs at $50 each = 264 x 50 =$13,200

Total selling price of 924 chairs  =$39,600+$ 17600+$13,200 =$70,400

Now , if 3,080 chairs can be purchased for a-lump sum amount of $131,670  

924 chairs can be puchased in a lump sum of  (924 x 131,670) /3080

=$39,501

Remember that  the Selling price for 924 chairs =$70,400

Gross profit realized during 2020 = $70,400 -$39,501=$30,899

b).  

Estimated Selling  Price value for straight chair =$50

Straight chairs remaining= 1540-264=1276

1276 at $50 each = 1276 X 50 =$63,800