Question

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

Conway Brush Company sells standard hair brushes. The following information summarizes Conway’s 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

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

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

Computation of unit cost of one brush

$$\begin{gathered} \mathbf{Unitcostforonebrush}\mathbf{=}\frac{\mathbf{Costofgoodssold}}{\mathbf{Numberofunitssold}} \\ \mathbf{=}\frac{\mathbf{\$}\mathbf{81}\mathbf{,}\mathbf{972}}{\mathbf{6}\mathbf{,}\mathbf{600}} \\ \mathbf{=}\mathbf{\$}\mathbf{12}\mathbf{.}\mathbf{42} \end{gathered}$$