Calculation of Operating Income Classic Coolers manufactures portable coolers ad

Question

Calculation of Operating Income Classic Coolers manufactures portable coolers adorned with college logos. During the first quarter of the year, the company had the following costs: Direct materials used $50,500 Direct labor 33,500 Factory rent 74,000 Factory equipment depreciation 11,500 Office equipment depreciation 1,400 Marketing expenses 5,100 Administrative expenses 13,500 The company had no beginning or ending work in process inventory and no beginning finished-goods inventory. Although 6,500 units were started and finished during the quarter, just 3,800 were sold, for an average price of $35 each. Required: Calculate Classic Coolers' operating income for the first quarter. If required, round your interim calculations to the nearest whole number.

Explanation / Answer

Manufacturing expenses = Direct materials cost + Direct labor + Factory rent + factory equipment depreciation

Manufacturing expenses = $50,500 + $33,500 + $74,000 + $11,500 = $169,500

Units produced = 6,500 units

Unit product cost = $169,500 / 6500 = $26 per unit

Units sold = 3,800 units

Ending inventory units = 6500 units – 3800 units = 2700 units

Ending inventory = $26 * 2700 units = $70,200

Cost of goods sold = Beginning inventory + Production – Ending inventory

Cost of goods sold = $0 + $169,500 - $70,200 = $99,300

Indirect expenses = Office equipment depreciation + marketing expenses + Administrative expenses

Indirect expenses = $1,400 + $5,100 + $13,500 = $20,000

Sales = Units sold * $35 = 3800 units * $35 = $133,000

Operating income = Sales – Cost of goods sold – Indirect expenses

Operating income = $133,000 - $99,300 - $20,000 = $13,700

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.