Question

As in the previous Participation Exercise, the Khalid Company manufactures and sells Paso-the-Salsa, which is a bottled condiment used on a variety of foods. Each bottle is sold for $5. The company recently had the following costs to produce 12,000 units of its product during August:
(1) Rent of $5,000 on a billboard to help advertise the product
(2) Rent on factory and equipment of $8,000
(3) Total payroll for hourly paid, factory workers $24,000
(4) Tomatoes, onions, spices and bottles $18,000
(5) Total payroll for salaried, administrative staff $6,000
Answer the next three questions below using the data above (along with the appropriate product cost and period cost classifications from the previous Participation Exercise); however, assume that the company only sold 8,000 units of those produced (i.e. 2/3 of the units produced) for the month of August.

(a) What is the company's cost of goods sold for the month (as needed, round your final answer to the nearest whole dollar)?company
(b) What is the company's net income for the month (as needed, round your final answer to the nearest whole dollar)?
(c) What is the company's ending inventory for the month (as needed, round your final answer to the nearest whole dollar)?

Answer 1

Answer:

Instructions are listed below.

Explanation:

Giving the following information:

Each bottle is sold for $5. The company recently had the following costs to produce 12,000 units of its product during August:

(1) Rent of $5,000 on a billboard to help advertise the product

(2) Rent on factory and equipment of $8,000

(3) Total payroll for hourly-paid, factory workers $24,000

(4) Tomatoes, onions, spices, and bottles $18,000

(5) Total payroll for salaried, administrative staff $6,000

The company sold 8,000 units.

A) First, we need to calculate the total and unitary cost of production:

Total cost= direct material + direct labor + factory overhead

Total cost= tomatoes, onions, spices, and bottles + Total payroll for hourly-paid, factory workers + Rent on factory and equipment

Total cost= 18,000 + 24,000 + 8,000

TC= 50,000

Unitary cost= 50,000/12,000= $4.17 per bottle

Now, we can calculate the cost of goods sold:

COGS= unitary cost* units sold= 4.17*8,000= $33,360

B) Income statement:

Sales= 8,000*5= 40,000

COGS= (33,360)

Gross profit= 6,640

Selling expense= (5,000)

Administrative expense= (6,000)

Net operating income= (4,360)

C) Inventory= unitary cost* ending inventory in units

Inventory= 4.17*4,000= $16,680