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Chapter 16: Q24E (page 893)

Question:Calculating income and cost per unit for a merchandising company

Conway Brush Company sells standard hair brushes. The following information summarizes Conway鈥檚 operating activities for 2018:

Selling and Administrative Expenses $ 47,058

Purchases 85,800

Net Sales Revenue 151,800

Merchandise Inventory, January 1, 2018 7,920

Merchandise Inventory, December 31, 2018 11,748

Requirements

1. Calculate the operating income for 2018.

2. Conway sold 6,600 brushes in 2018. Compute the unit cost for one brush.

Short Answer

Expert verified

The net operating income of Conway Brush Company is $22,770 and the unit cost for one brush is $12.42

Step by step solution

01

Step-by-Step SolutionStep 1: Calculation of operating income

Income Statement

Amount ($)

Amount ($)

Net Sales Revenue

$151,800

Less: COGS

Merchandise Inventory, Jan 1, 2018

$7,920

Purchases

$85,800

Less: Merchandise Inventory, Dec 31, 2018

-$11,748

$81,972

Gross Profit

$69,828

Selling and administrative expenses

$47,058

Net Operating Income

$22,770

02

Computation of unit cost of one brush

Unitcostforonebrush=CostofgoodssoldNumberofunitssold=$81,9726,600=$12.42

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Most popular questions from this chapter

Describe a merchandising company, and give an example.

Identify the following characteristics as primarily related to financial accounting (FA) or managerial accounting (MA):

4. Has a focus on the future.

Question:Calculating cost of goods sold for merchandising and manufacturing companies

Below are data for two companies:

Company A Company B

Beginning balances:

Merchandise Inventory \( 10,600

Finished Goods Inventory \) 15,000

Ending balances:

Merchandise Inventory 13,100

Finished Goods Inventory 11,700

Net Purchases 154,500

Cost of Goods Manufactured 214,500

Requirements

1. Define the three business types: service, merchandising, and manufacturing.

2. Based on the data given for the two companies, determine the business type of each one.

3. Calculate the cost of goods sold for each company

Computing cost of goods manufactured

Consider the following partially completed schedules of cost of goods manufactured. Compute the missing amounts.

Banner, Inc. Larry鈥檚 Bakery Sports Gear

Beginning Work-in-Process Inventory \( (a) \) 40,800 \( 2,200

Direct Materials Used 14,400 35,900 (g)

Direct Labor 10,300 20,100 1,900

Manufacturing Overhead (b) 10,000 900

Total Manufacturing Costs Incurred during the Year 45,200 (d) (h)

Total Manufacturing Costs to Account for 55,400 (e) 8,300

Ending Work-in-Process Inventory (c) (25,500) (2,600)

Cost of Goods Manufactured \) 50,500 \( (f) \) (i)

Identifying product costs and period costs Classify each cost of a paper manufacturer as either a product cost or a period cost:

f. Cost of TV ads.
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