15BP The Bradley Corporation produces... [FREE SOLUTION]

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Foundations Of Financial Management

Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen

Business Studies

16th Edition 路 768 pages

ISBN: 9781259277160

Chapter 2: 15BP (page 115)

The Bradley Corporation produces a product with the following costs as of July 1, 20X1:
Material
$4 per unit
Labor
4 per unit
Overhead
2 per unit
Beginning inventory at these costs on July 1 was 3,250 units. From July 1 to December 1, 20X1, Bradley produced 12,500 units. These units had a material cost of $5, labor of $4, and overhead of $5 per unit. Bradley uses LIFO inventory accounting.
Assuming that Bradley sold 14,000 units during the last six months of
the year at $19 each, what is its gross profit? What is the value of ending
inventory?

Short Answer

Expert verified

The gross profit of the company is $76,000 and the value of ending inventory is $35,000.

Step by step solution

Unit price of beginning inventory

$\begin{array}{rcl} Beginning unit price & = & Material cost + Labor cost - Overhead \\ = & $ 4 + $ 4 + $ 2 \\ = & $ 10 \end{array}$

Beginning cost of inventory

$\begin{array}{rcl} Beginning inventory cost & = & Beginning units 脳 Unit cost \\ = & 5, 000 脳 $ 10 \\ = & $ 50, 000 \end{array}$

Cost of units produced

$\begin{array}{rcl} Cost of units produced & = & Material cost + Labor cost + Overhead \\ = & $ 5 + $ 4 + $ 5 \\ = & $ 14 \end{array}$

Cost of production

$\begin{array}{rcl} Cost of production & = & Units produced 脳 Cost of units produced \\ = & 12, 500 脳 $ 14 \\ = & $ 175, 000 \end{array}$

Cost of sales assuming LIFO inventory accounting method

$\begin{array}{rcl} Cost of sales & = & (Produced units 脳 cost of production) + (Balance units 脳 Beginning unit cost) \\ = & (12, 500 脳 $ 14) + ((14, 000 - 12, 500) 脳 $ 10) \\ = & $ 175, 000 + $ 15, 000 \\ = & $ 190, 000 \end{array}$

Gross profit

$\begin{array}{rcl} Gross profit & = & Sales - Cost of sales \\ = & (14, 000 脳 $ 19) - $ 190, 000 \\ = & $ 76, 000 \end{array}$

Value of ending inventory

$\begin{array}{rcl} Ending inventory & = & Beginning inventory + Cost of production - Cost of sales \\ = & $ 50, 000 + $ 175, 000 - $ 190, 000 \\ = & $ 35, 000 \end{array}$

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Sales	\( 2790000
Cost of goods sold	1790000
Gross profits	\) 1000000
Selling and administrative expenses	302000
Operating profits	\( 698000
Interest Expense	54800
Income before tax	\) 643200
Taxes 30%	192960
Income after tax	$ 450240

Selling and administrative expenses	$328,000
Depreciation expenses	195,000
Sales	1,660,000
Interest expenses	129,000
Cost of goods sold	560,000
Taxes	171,000

Accumulated depreciation	\(309,000
Retained earnings	187,000
Cash	14,000
Bonds payable	136,000
Accounts receivable	54,000
Plant and equipment 鈥� original cost	775,000
Accounts payable	35,000
Allowance for bad debts	9,000
Common stock, \)1 par, 100,000 share outstanding	100,000
Inventory	70,000
Preferred stock, $59 par, 1,000 share outstanding	59,000
Marketable securities	24,000
Investments	20,000
Notes payable	34,000
Capital paid in excess of par (common stock)	88,000

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Short Answer

Step by step solution

Unit price of beginning inventory

Beginning cost of inventory

Cost of units produced

Cost of production

Cost of sales assuming LIFO inventory accounting method

Gross profit

Value of ending inventory

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