Rossi,IncSells Plasticware Prepare an Income Statement for Rossi,Inc

question 238

Essay

Rossi,Inc.sells plasticware.The following information summarizes Rossi's operating activities for the year:
$$\begin{array} { | l| r | } \hline \text { Utilities Expense } & \$ 65,000 \\\hline \text { Rent Expense } & 10,000 \\\hline \text { Sales Commissions Expense } & 32,500 \\\hline \text { Purchases of Merchandise } & 260,000 \\\hline \text { Merchandise Inventory on January 1 } & 65,000 \\\hline \text { Merchandise Inventory on December 31 } & 97,500 \\\hline \text { Sales Revenue } & 650,000 \\\hline\end{array}$$ Prepare an income statement for Rossi,Inc.,a merchandiser,for the year ended December 31 using the format below.Include a proper heading.
$$\begin{array} { | l | l | l | } \hline \text { Sales Revenue } &\quad\quad\quad&\quad\quad\quad \\\hline \text { Cost of Goods Sold: } & & \\\hline \text { Beginning Inventory } & & \\\hline \text { Purchases } & & \\\hline \text { Cost of Goods Available for Sale } & & \\\hline \text { Ending Inventory } & & \\\hline \text { Cost of Goods Sold } & & \\\hline \text { Gross Profit } & & \\\hline \text { Selling Expenses: } & & \\\hline \text { Sales Commissions Expense } & & \\\hline \text { Administrative Expenses: } & & \\\hline \text { Rent Expense } & & \\\hline \text { Utilities Expense } & & \\\hline \text { Total Operating Expenses } & & \\\hline \text { Operating Income } & & \\\hline\end{array}$$

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Definitions:

Actual Cost

The true financial expenditure required to produce a product or service, as opposed to budgeted or standard costs.

Labour Rate Variance

The difference between the actual cost of direct labor and the standard cost of direct labor multiplied by the actual hours worked.

Direct Labour

Rephrased: The workforce directly involved in manufacturing products or providing services, whose costs directly affect the cost of goods sold.

Variable Manuf. Overhead

Variable Manufacturing Overhead includes those manufacturing overhead costs that vary directly with the level of production, such as utilities for the production facility.