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Assignment 3 - Conceptual Connection

Jalapeno Company provided sales and cost information from last year to prepare an income statement. The income statement showed sales of P3,360,000 with a cost of goods sold of P795,000 resulting in a gross profit of P2,565,000. Operating expenses totaled P1,291,000 with administrative expenses being the highest at P854,000. This left net income of P1,274,000. A manager could use the income statement to better control costs by monitoring and evaluating administrative expenses to potentially increase net income.

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366 views

Assignment 3 - Conceptual Connection

Jalapeno Company provided sales and cost information from last year to prepare an income statement. The income statement showed sales of P3,360,000 with a cost of goods sold of P795,000 resulting in a gross profit of P2,565,000. Operating expenses totaled P1,291,000 with administrative expenses being the highest at P854,000. This left net income of P1,274,000. A manager could use the income statement to better control costs by monitoring and evaluating administrative expenses to potentially increase net income.

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Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Jalapeno Company provided the following information for last year:

Sales in units                                                                      280,000


               Selling price                                                                      P12
               Direct materials                                                              180,000
               Direct labor                                                                         505,000
               Manufacturing overhead                                            110,000
               Selling expense                                                                  437,000
               Administrative expense                                                854,000
Last year, beginning and ending inventories of work in process and finished goods
equaled zero.
Required:
1.  Prepare an income statement for Jalapeno for last year.  (5 pts.)
2.  Briefly explain how a manager could use the income statement created in
Requirement 1 to better control costs.  (5 pts.)

Answers:
1. a. Cost of Goods Manufactured:
Beginning Work in Process P0
Direct Labor P505,000
Direct Materials 180,000
Manufacturing Overhead 110,000 _______
Total Manufacturing Cost 795,000
Total Costs to Account for 795,000
Ending Work in Process ___0___
Cost of Goods Manufactured P795,000

b. Cost of Goods
Beginning Finished Goods P0
Cost of Goods Manufactured 795,000
Goods Available for Sale 795,000
Ending Finished Goods __0____
Cost of Goods Sold P 795,000

c. Income Statement
Jalapeno Company
Statement of Comprehensive Income
For the Year Ended 20xx

Sales (280,000 x P 12) P 3,360,000


           Cost of goods sold (795,000)
Gross Profit                                                   2,565,000
Operating Expenses
       Selling expense P 437,000
Administrative expense 854,000 (1,291,000)
Net income                                                     P1,274,000

2. According to the income statement in requirement 1, the manager can control cost by
monitoring and evaluating the administrative expense since it has the highest cost from
the operating expenses. With that, the company could have a higher and better net
income.

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