Question

The following information was extracted from the accounting records of​ Pickin’ and​ Grinnin’, LLC, a manufacturer of​ guitars: Beginning Raw Materials Inventory ​$375,000 Ending Raw Materials Inventory ​$435,000 Direct Factory Labor ​$185,000 Indirect Factory Labor ​$ ​ 35,000 Factory Utilities ​$ ​ 44,000 ​Selling, General, and Administrative Expenses ​$125,000 Building​ Depreciation* ​$300,000 ​*​70% of the building is devoted to​ production, 30% of the building is devoted to selling and administrative functions. ​$440 comma 546 in direct materials were purchased during the period. Raw Materials Inventory consists solely of direct material. There was a ​$47 comma 476 net increase in the ​company’s Work in Process inventories during the year. The​ company's beginning and ending finished goods inventories were​ $475,000 and​ $450,000, respectively. Based solely on the above​ information, what is the​ company's gross profit for the period assuming sales revenue totaled ​$1 comma 449 comma 436​?

Answer 1

Answer:

Gross profit= $783866

Explanation:

Gross profit is the profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services.

Gross profit=Revenue−Cost of goods sold (COGS)

COGS=Beginning Inventory (finished products)+Production during period−Ending Inventory (finished products)

Gross profit assesses a company's efficiency at using its labor and supplies in producing goods or services. Consider variable costs – that is, costs that fluctuate with the level of output, such as:

materials, direct labor, commissions for sales staff, credit card fees on customer purchases, equipment, utilities for the production site, shipping,  etc

First, we need to calculate the production during the period:

Cost of good manufactured= Beginning work in progress+ direct materials of the period + direct labor + manufactured overhead - ending work in progress

Net workin progress= $47476

Direct materials = beginning inventory + purchase - ending inventory= 375000+ 440546 - 435000= 380546

Direct labor=  $18500

Manufactured overhead=indirect labor+building depretiation (70%)+ factory utilities= 35000+ 30000*0,70+44000=289000

Cost of good manufactured=-47476+380546+18500+289000=$640570

Now we can calculate the cost of sold goods

COSG=Beginning Inventory (finished products)+Production during period−Ending Inventory (finished products)

COSG= 475000+640570-450000=$665570

Finally, we calculate the gross profit

Gross profit= revenue - COSG= 1449436 - 665570= $783866