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Example Problem

X Company provided data for March showing beginning and ending inventory levels as well as expenses and sales. They completed 100,000 units at $8 each, generating $800,000 in sales revenue. Cost of goods sold was $193,000, resulting in a gross profit of $607,000. Operating expenses totaled $82,900, giving an operating income of $524,100.

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Lara Camille Celestial
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47 views2 pages

Example Problem

X Company provided data for March showing beginning and ending inventory levels as well as expenses and sales. They completed 100,000 units at $8 each, generating $800,000 in sales revenue. Cost of goods sold was $193,000, resulting in a gross profit of $607,000. Operating expenses totaled $82,900, giving an operating income of $524,100.

Uploaded by

Lara Camille Celestial
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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X COMPANY has provided the following data for the month of March:

REQUIRED:
BEGINNING ENDING
DM inventory $25,000 $30,000
WIP inventory 16,000 18,000 1. Total DM available
Finished Goods inv. 36,000 59,000 2. Total DM
MARCH ACTIVITY 3. Total Manufacturing
$71,000
Overhead
DM purchases
4. Total Manufacturing Cost
83,000
DL incurred 5. Cost of Goods
Variable Overhead 58,000 Manufactured
Fixed Overhead
11,000 6. Cost of Goods Sold
Sales Commission 13,500 7. Sales Revenue
8. Gross Profit
Property Taxes on office 8,600
9. Operating Expenses
Sales Office Salaries 13,000
10. Operating Income
Shipping fee on customers 17,800
President’s Salaries 30,000

X COMPANY completed 100,000 units at a price of $8 each.


SOLUTIONS:

1. Total DM Available = (DM beg + DM purchases) = 25,000 + 71,000 = 96,000


2. Total DM = (Total DM Available – DM end) = 96,000 – 30,000 = 66,000
3. Total Manufacturing Overhead = (Variable Overhead + Fixed Overhead) = 58,000 + 11,000 = 69,000
4. Total Manufacturing Cost = DM + DL + MO = 66,000 + 83,000 + 69,000 = 218,000
5. Cost of Goods Manufactured = Total Man. Cost + WIP beg – WIP end= 218,000 + 16,000 – 18,000 = 216,000
6. Cost of Goods Sold = COGM + FG beg – FG end) = 216,000 + 36,000 – 59,000 = 193,000
7. Sales Revenue = Units x unit price = 100,000 x 8 = 800,000
8. Gross Profit = (Sales – COGS) = 800,000 – 193,000 = 607,000
9. Operating Expenses:
SE: 13,500 + 17,800 + 13,000 = 44,300
AE: 8,600 + 30,000 = 38,600
OE: 82,900
10. Operating Income = (SR – COGS – OE) = 800,000 – 193,000 – 82,900 = 524,100

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