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Selected data for three companies are given below. All inventory amounts are ending balances and all amounts are in millions.

Company A Company B Company C

Cash \( 6 Wages Expense \) 12 Administrative Expenses $ 4

Net Sales Revenue 48 Equipment 32 Cash 25

Finished Goods Inventory 10 Accounts Receivable 8 Net Sales Revenue 75

Cost of Goods Sold 23 Service Revenue 65 Selling Expenses 8

Selling Expenses 4 Cash 34 Merchandise Inventory 12

Equipment 67 Rent Expense 12 Equipment 55

Work-in-Process Inventory 9 Accounts Receivable 19

Accounts Receivable 14 Cost of Goods Sold 25

Cost of Goods Manufactured 23

Administrative Expenses 7

Raw Materials Inventory 6

Identifying differences between service, merchandising, and manufacturing companies Using the data on the previous page, calculate operating income for each company.

Short Answer

Expert verified

The net operating income of company A is $14, company B is $41 and company C is $38.

Step by step solution

01

Step-by-Step SolutionStep 1 : Company A


Calculation of Operating Income for Company A

Amount ($)

Amount ($)

Net Sales

$48

Less Cost of goods sold

$23

Gross Profit

$25

Selling and administrative expenses

Selling Expense

$4

Administrative Expense

$7

Total selling and admin expense

$11

Operating Income

$14

02

Company B


Calculation of Operating Income for Company B

Amount ($)

Amount ($)

Service Revenue

$65

Less Wages

$12

Gross Profit

$53

Selling and administrative expenses

Rent Expense

$12

Total selling and admin expense

$12

Operating Income

$41

03

Company C


Calculation of Operating Income for Company C

Amount ($)

Amount ($)

Net Sales

$75

Less Cost of goods sold

$25

Gross Profit

$50

Selling and administrative expenses

Selling Expense

$8

Administrative Expense

$4

Total selling and admin expense

$12

Operating Income

$38

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Most popular questions from this chapter

Preparing an income statement and calculating unit cost for a merchandising company

Clyde Conway owns Clydeโ€™s Pets, a small retail shop selling pet supplies. On December 31, 2018, the accounting records of Clydeโ€™s Pets showed the following:

Merchandise Inventory on December 31, 2018 $ 10,100

Merchandise Inventory on January 1, 2018 15,900

Net Sales Revenue 56,000

Utilities Expense for the shop 3,300

Rent for the shop 4,100

Sales Commissions 2,650

Purchases of Merchandise Inventory 25,000

Requirements

1. Prepare an income statement for Clydeโ€™s Pets for the year ended December 31, 2018.

2. Clydeโ€™s Pets sold 3,850 units. Determine the unit cost of the merchandise sold, rounded to the nearest cent

Computing cost of goods manufactured and cost of goods sold

Use the following information for a manufacturer to compute cost of goods manufactured and cost of goods sold:

Balances: Beginning Ending

Direct Materials \( 27,000 \) 28,000

Work-in-Process Inventory 40,000 32,000

Finished Goods Inventory 18,000 25,000

Other information:

Purchases of direct materials $ 73,000

Direct labor 88,000

Manufacturing overhead 43,000

Computing cost of goods sold, manufacturing company

Use the following information to calculate the cost of goods sold for The Ellis Company for the month of June:

Finished Goods Inventory:

Beginning Balance $ 30,000

Ending Balance 10,000

Cost of Goods Manufactured 165,000

This is the first problem in a sequence of problems for Piedmont Computer Company, a manufacturer of personal computers and tablets. During its first month of manufacturing, Piedmont Computer Company incurred the following manufacturing costs:

Balances: Beginning Ending

Direct Materials \( 10,500 \) 9,700

Work-in-Process Inventory 0 17,000

Finished Goods Inventory 0 31,000

Other information:

Direct materials purchases $ 16,000

Plant janitorial services 500

Sales salaries expense 10,000

Delivery expense 1,600

Sales revenue 1,100,000

Utilities for plant 16,000

Rent on plant 9,000

Customer service hotline costs 19,000

Direct labor 210,000

Prepare a schedule of cost of goods manufactured for Piedmont Computer Company for the month ended January 31, 2020.

Computing cost of goods manufactured

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

Banner, Inc. Larryโ€™s 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)

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