Question

Newton Corporation entered into the following transactions during its first year of operations. (Assume all transactions involve cash.) 1) Acquired $1,300 of capital from the owners. 2) Purchased $330 of direct raw materials. 3) Used $230 of these direct raw materials in the production process. 4) Paid production workers $430 cash. 5) Paid $230 for manufacturing overhead (applied and actual overhead are the same). 6) Started and completed 250 units of inventory. 7) Sold 80 units at a price of $6 each. 8) Paid $70 for selling and administrative expenses. The amount of net income for the year was:

Answer 1

Net Income $ 125.2

Step-by-step explanation:

Capital acquired and the amount of material purchased is not accounted for. Only amount of material used is accounted for .

Newton Corporation

Income Statement

Sales 80* $ 6= $ 480

Less COGS $ 284.8

Gross Profit $ 195.2

Less Selling and Administrative Expense $ 70

Net Income $ 125.2

We calculate the COGS for number of the units sold.

Calculation Of Cost Of Goods Sold

Direct Material used $ 230

Direct Labor $ 430

Production Overheads $ 230

Total Manufacturing Costs $ 890

Total units completed 250

Cost of 1 unit = Total Cost/ Total Units= $ 890/250= $ 3.56 per unit

Cost of 80 Units = $ 3.56 * 80= $ 284.8