Williamson Corporation acquired two inventory items at a lump-sum cost of $40,000.The acquisition included 3,000 units of product CF, and 7,000 units of product 3B.CF normally sells for $12 per unit, and 3B for $4 per unit.If Williamson sells 1,000 units of CF, what amount of gross profit should it recognize?
A)$1,500.
B)$4,500.
C)$8,000.
D)$9,500.

Question

Quizplus · Accepted Answer

First, we need to determine the cost of 1,000 units of CF. To do so, we need to determine the cost allocation of the lump-sum purchase.

The total cost of the purchase is $40,000, and the ratio of CF to 3B units is 3:7. Therefore, the cost allocated to CF can be calculated as follows:

(3/10) x $40,000 = $12,000

This means that the cost per unit of CF is $4 ($12,000 ÷ 3,000 units).

Now we can determine the gross profit on the sale of 1,000 units of CF.

Revenue from the sale of 1,000 units of CF = 1,000 units x $12 per unit = $12,000

Cost of goods sold for 1,000 units of CF = 1,000 units x $4 per unit = $4,000

Gross profit = Revenue - Cost of goods sold = $12,000 - $4,000 = $8,000.

Therefore, the correct answer is B) $8,000.

Williamson Corporation Acquired Two Inventory Items at a Lump-Sum Cost