Question

E9.10 (L02) (Relative Standalone Sales Value Method) During 2019, Crawford Furniture purchases a carload of wicker chairs. The manufacturer sells the chairs to Crawford for a lump sum of £60,000 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. Estimated Selling Price Each Type Lounge chairs Armchairs Straight chairs No. of Chairs 400 300 800 £90 80 50 During 2019, Crawford sells 200 lounge chairs, 100 armchairs, and 120 straight chairs. Instructions What is the amount of gross profit realized during 2019? What is the amount of inventory of unsold straight chairs on December 31, 2019?

Answer 1

Type	No of chairs	Estimated selling price	No of units sold	Sales value ( No of units *selling price)	Cost of goods sold [Units sold * cost per unit]	Gross Profit Sales - COGS	Closing inventory units	Value of closing inventory [ Closing inventory units * cost per unit]
Lounge chairs	400	90	200	18000	10800	7200	200	10800
Armchairs	300	80	100	8000	4800	3200	200	9600
Straight chairs	800	50	120	6000	3600	2400	680	20400
Total				32000	19200	12800		40800

Workings:

Type	No of chairs	Estimated selling price	Estimated total sales	% of total sales	Cost allocation using sales %	Cost per unit
Lounge chairs	400	90	36000	36%	21600	54
Armchairs	300	80	24000	24%	14400	48
Straight chairs	800	50	40000	40%	24000	30
Total			100000		60000