Question

The Bradley Corporation produces a product with the following costs as of July 1, 20x1: Material Labor Overhead $3 per unit 3 per unit 1 per unit Beginning inventory at these costs on July 1 was 3,100 units. From July 1 to December 1, 20X1, Bradley Corporation produced 12,200 units. These units had a material cost of $2, labor of $3, and overhead of $4 per unit. Bradley uses LIFO inventory accounting. a. Assuming that Bradley Corporation sold 13,400 units during the last six months of the year at $14 each, what is its gross profit? Gross profit b. What is the value of ending inventory? Ending inventory

Answer 1

Cost per unit = Material per unit + Labor per unit + Overhead per unit

Beginning inventory cost per unit = $3 + $3 + $1 = $7

Cost per unit produced = $2 + $3 + $4 = $9

Cost of units available for sale = (3,100 * $7) + (12,200 * $9) = $21,700 + $109,800

= $131,500

a. Under the LIFO method, units sold consists of units from production and later beginning inventory.

13,400 units sold consists of 12,200 units from production and 1,200 units from beginning inventory.

Cost of goods sold = (12,200*$9) + (1,200 * $7) = $118,200

Sales = 13,400 * $14 = $187,600

Gross profit = Sales - Cost of goods sold

= $187,600 - $118,200

= $69,400

b. Ending inventory = Cost of units available for sale - Cost of goods sold

= $131,500 - $118,200

= $13,300