Question

# Will Co. buys items A and B from Stargell Inc. in a lump-sum inventory purchase at...

Will Co. buys items A and B from Stargell Inc. in a lump-sum inventory purchase at a cost of \$96,000. Will acquired 4,000 units of item A and 8,000 units of item B. Will usually sells item A for \$26 per unit and item B for 9 per unit. In June, Will sold 1,000 units of A. How much gross profit did it realize? (Round your answer to the nearest dollar.)

#### Homework Answers

Answer #1

>> Product - A Total Sales = 4,000 * \$ 26

>> Product - A Total Sales = \$ 104,000.

>> Product - B Total Sales = 8,000 * \$ 9

>> Product - B Total Sales = \$ 72,000.

>> Sales Mix = \$ 104,000 : \$ 72,000

>> Sales Mix = 13 : 9

>> Joint cost allocated to Product - A = \$ 96,000 * ( 13 / ( 13 + 9 ) )

>> Joint cost allocated to Product - A = \$ 56,727

>> Cost per unit of Product - A = \$ 56,727 / 4,000 = \$ 14.18175

>> Gross profit on Sale = 1,000 * ( \$ 26 - \$ 14.18175 )

>> Gross profit on Sale = \$ 11,818

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