Answer:
$4,250
Explanation:
Given that,
Payment for direct material = $12,625
Payment for production workers' wages = $10,000
Lease payments and utilities on the production facilities = $9,000
General, selling, and administrative expenses = $4,500
Units produced = 5,750 units
Units sold = 3,500 units
Selling price = $8.00 per unit
Cost of Production for 5,750 Units:
= Direct material cost + Worker's wages cost + Lease payments and utilities
= $12,625 + $10,000 + $9,000
= $31,625
Cost of Good Sold:
= Cost of Production - (Cost of Production ÷ Units produced) × (Units produced - Units sold)
= $31,625 - ($31,625 ÷ 5,750) × (5,750 - 3,500)
= $31,625 - ($5.5 × 2,250)
= $31,625 - $12,375
= $19,250
Amount of gross margin for the first year:
= Sale - Cost of Good Sold
= (3,500 × $8.00) - $19,250
= $28,000 - $19,250
= $8,750
Net Operating Income for the first year:
= Gross margin - General, selling, and administrative expenses
= $8,750 - $4,500
= $4,250
