XYZ corporation acquired two inventory items at a lump-sum cost of $100,000. The acquisition included 3,000 units of product 1P, and 7,000 units of product 2P. 1P normally sells for $30 per unit, and 2P for $10 per unit. If XYZ sells 1,000 units of 1P, what amount of gross profit should it recognize? a. $3,750b. $11,250. c. $20,000. d. $23,750

Question

Sophie Chaney

Business

4 December, 04:54

XYZ corporation acquired two inventory items at a lump-sum cost of $100,000. The acquisition included 3,000 units of product 1P, and 7,000 units of product 2P. 1P normally sells for $30 per unit, and 2P for $10 per unit. If XYZ sells 1,000 units of 1P, what amount of gross profit should it recognize? a. $3,750b. $11,250. c. $20,000. d. $23,750

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Nico · Answer 1

b. $11,250

Explanation:

We are asked to know the gross profit:

gross profit: sales revenue - COGS

in this case sales revenue 1,000 units x $ 30 = 30,000

for COGS we will calculate with weighted average based on the sales price:

3,000 x 30 + 7,000 x 10 = 90,000 + 70,000 = 160,000

the cost of 160,000 dollars of sale is 100,000

we cross multiply for 30,000:

100,000 / 160,000 x 30,000 = 18,750 cost

now we solve for gross profit:

sales 30,000 - cost 18,750 = 11.250