Question

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

Part a(1):-

Category	beginning inventory	Quantity purchase	Quantity sold	Ending inventory	closing inventory value at base cost (A)	closing inventory value at current cost(B)	multiple pools price index (B/A)
Portable	7800	19500	18200	9100	910000	1001000	1.1
Midsize	10400	26000	31200	5200	1300000	1560000	1.2
Flat screen	3900	13000	7800	9100	3640000	4550000	1.25
Total	22100	58500	57200	23400	5850000	7111000

Working note:-

Ending inventory base cost :

Portable	9100*100	910000
Midsize	5200*250	1300000
Flat screen	9100*400	3640000
		5850000

Ending invrinven current cost:

Portable	9100*110	1001000
Midsize	5200*300	1560000
Flat screen	9100*500	4550000
		7111000

Multiple pools price base :

Portable	1001000/910000	1.1
Midsize	1560000/1300000	1.2
Flat screen	4550000/3640000	1.25

So, the price index is = 7111000/5850000= 1.2155

Part a(2) :-

1.ending inventory LIFO :

Base layer = 4940000

Incremental layer = (5850000-4940000)*1.21 = 1101100

Ending inventory = 4940000+1101100 =$6041100

2. Cost of goods sold :-

Base beginning inventory + total purchase - Ending inventory

= 4940000+16445000-6041100 = $15343900

3. Gross profit :-

Sales - cost of goods sold

19890000 - 15343900 = $4546100

Note:-

Sales = 18200*150=2730000

31200*400=12480000

7800*600=4680000

Total = 19890000