Question

Problem 8-08 (Part Level Submission) Charles’s Televisions produces television sets in three categories: portable, midsize, and flat-screen. On January 1, 2020, Charles adopted dollar-value LIFO and decided to use a single inventory pool. The company’s January 1 inventory consists of: Category Quantity Cost per Unit Total Cost Portable 7,800 $100 $ 780,000 Midsize 10,400 250 2,600,000 Flat-screen 3,900 400 1,560,000 22,100 $4,940,000 During 2020, the company had the following purchases and sales. Category Quantity Purchased Cost per Unit Quantity Sold Selling Price per Unit Portable 19,500 $110 18,200 $150 Midsize 26,000 300 31,200 400 Flat-screen 13,000 500 7,800 600 58,500 57,200

(a1) Your answer is correct. Calculate price index. (Round price index to 4 decimal places, e.g. 1.4562.) Price index SHOW SOLUTION LINK TO TEXT Attempts: 1 of 5 used

(a2) Compute ending inventory, cost of goods sold, and gross profit. (Round answers to 0 decimal places, e.g. 6,548.) Ending inventory $ Cost of goods sold $ Gross profit $

Answer 1

1	Price Index	1.2156
	Category	Quantity	Quantity Purchased	Quantity Sold	Ending Inventory	Cost per unit as on Jan 1	Closing inventory value at base cost	Cost per unit as on Dec 31	Closing inventory value at recent cost
	Portable	7,800	19,500	18,200	9,100	$100	$910,000	$110	$1,001,000
	Midsize	10,400	26,000	31,200	5,200	$250	$1,300,000	$300	$1,560,000
	Flat-screen	3,900	13,000	7,800	9,100	$400	$3,640,000	$500	$4,550,000
							$5,850,000		$7,111,000
	Ending Inventory (Units) = Opening inventory + Purchase - Sold
	Price Index = ending inventory at current cost/ending inventory at base cost
	Price Index =	1.2156
2	Ending inventory	$6,046,196
	base layer ($4,940,000 ) *1	$4,940,000
	Incremental layer ($5,850,000 - $4,940,000)*1.2156	$1,106,196
	Ending inventory	$6,046,196
	Cost of goods sold	$15,338,804
	Opening	$4,940,000	[(7,800*$100) + (10,400*$250) + (3,900*$400)]
	Purchase	$16,445,000	[(19,500*$110)+ (26,000*$300) + (13,000*$500)]
	Less: Ending	$6,046,196
		$15,338,804
	Gross profit	$4,551,196
	Sales	$19,890,000	[(18,200*$150) + (31,200*$400) + (7,800*$600)]
	COGS	$15,338,804
	Gross Profit	$4,551,196