Question

Compute for net income or net loss of Marc Max Auto Supply. Marc Max auto supply sells car batteries at P7,140. Purchases for the month of May consisted of 35 units at P 5,500 each. At the end of the month an inventory count showed that 15 batteries were unsold. The operating expenses amount to P19,000.

Answer 1

To calculate the net income for Marc Max Auto Supply, we find the sales revenue, subtract the cost of goods sold to get gross profit, and then subtract operating expenses, resulting in a net income of P13,800 for the month of May.

Step-by-step explanation:

To compute the net income or net loss for Marc Max Auto Supply, we follow these steps:

1. Calculate the sales revenue by multiplying the number of units sold by the selling price per unit.
2. Find the cost of goods sold (COGS), which is the cost of purchasing the batteries that have been sold, by multiplying the number of units sold by the purchase price per unit.
3. Subtract the COGS from the sales revenue to obtain the gross profit.
4. Deduct the operating expenses from the gross profit to arrive at the net income or net loss.

Let's apply these steps to the given data:

1. Sales revenue: (35 units sold - 15 units unsold) x P7,140 = 20 x P7,140 = P142,800
2. COGS: (35 units purchased - 15 units unsold) x P5,500 = 20 x P5,500 = P110,000
3. Gross profit: P142,800 - P110,000 = P32,800
4. Net income/loss: P32,800 - P19,000 (operating expenses) = P13,800

Marc Max Auto Supply's net income for the month of May is P13,800.