Question

Same information as the previous question. Auto Resales, Inc. started business on January 1, 20X1 (beginning inventory balance is zero). On January 1, 20X1 the company purchased all of the inventory for their used car sales lot. Purchase information is: Total cost of the cars purchased $1,500,000 Number of cars purchased 100 Types of cars, number of cars, and sales price per car are as follows: Number purchased Sales price per car Ford 20 $10,000 Lexus 40 $20,000 BMW 40 $25,000 Total number of lots 100 During the year, Auto Resales, Inc. sold the following cars: Ford 8 Lexus 10 BMW 30 Total cars sold 48 Ending inventory in units 52 Using the relative sales value approach, what is the total cost of goods sold for 20X1?

Answer 1

Total cost of Cars purchased		15,00,000
Divide: Total sales revenue
Ford	(20*10000)	200000
Lexus	(40*20000)	800000
BMW	(40*25000)	1000000	20,00,000
% of cost to Relative sales value	75%
Cost allocated to Each car
Cars	Sales value	% of cost	Allocated cost	Units	Cost allocated per unit
Ford	2,00,000	75%	150000		20	7500
Lexus	8,00,000	75%	600000		40	15000
BMW	10,00,000	75%	750000		40	18750
Cost of goods sold
Cars		Cost per unit	Unit sold		Total cost of goods sold
Ford		7500		8		60000
Lexus		15000		10		150000
BMW		18750		30		562500
			Total Cost of goods sold	772500
Answer is $ 772,500