Question

The Bradley Corporation produces a product with the following costs as of July 1, 20X1: Material $1 per unit Labor 3 per unit Overhead 2 per unit Beginning inventory at these costs on July 1 was 3,800 units. From July 1 to December 1, 20X1, Bradley Corporation produced 13,600 units. These units had a material cost of $4, labor of $6, and overhead of $4 per unit. Bradley uses LIFO inventory accounting. a. Assuming that Bradley Corporation sold 16,200 units during the last six months of the year at $19 each, what is its gross profit? b. What is the value of ending inventory?

Answer 1

working:

beginning inventory units	3800 units
add:units produced	13,600 units
total units available for sale	17,400
less:units sold	(16,200)
units in closing inventory	1,200

out of 16,200 units sold , since LIFO is used.

13,600 of the units produced will be first sold.

(16,200 -13,600 =>2,600 units) will be from beginning inventory.

cost of 13.600 units

=> 13,600 *($4+$6+$4)

=>13,600*($14)

=>$190,400.

cost of 2600 units from opening stock

=>2600*($1 +$3+$2)

=>2600*$6

=>$15,600.

total cost of goods sold = $190,400 +15,600

=>$206,000.

requirement a:

sales (16,200 units*$19)	$307,800
less: cost of goods sold	(206,000)
gross profit	$101,800

requirement b:

value of ending inventory =1200 units in ending inventory *($1+$3+$2)

=>$7,200.