In Its First Year of Operations, a Company Has Sales

question 104

Multiple Choice

In its first year of operations, a company has sales of $158,000, ending finished goods inventory of $11,500, variable manufacturing costs of $49,000, and fixed manufacturing costs of $31,000 for the year. The company pays 9% commission to its sales force and has fixed selling and administrative expenses of $27,000 annually. The company has no other variable expenses.
Assuming the company uses direct costing, the net income for the year is

• A)$52,280.
• B)$83,280.
• C)$25,280.
• D)$48,280.

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Definitions:

Month

A period of time, typically used as a basic time unit for planning and accounting, roughly based on the natural period related to the motion of the Moon.

Cost of Goods Manufactured

The total production cost of goods that are completed in a specific accounting period, including costs of materials, labor, and overhead attributable to the production process.

Period Costs

Costs that are not directly tied to production and are expensed in the period in which they are incurred.

Product Costs

Costs that are directly associated with the manufacturing of products, including direct materials, direct labor, and manufacturing overhead.