Question

Oliver Brush Company sells standard hair brushes. The following information summarizes Oliver​'s operating activities for 2018​:

Selling and Administrative Expenses $52,704
Purchases 73,200
Net Sales Revenue 146,400
Merchandise Inventory, January 1, 2018 10,980
Merchandise Inventory, December 31, 2018 8,052


Requirements:
a. Calculate the operating income for 2018.
b. Oliver sold 6 comma 400 brushes in 2018. Compute the unit cost for one brush.

Answer 1

The operating income for Oliver Brush Company in 2018 is $17,568, and the unit cost for one brush is $11.89.

Step-by-step explanation:

To calculate the operating income for 2018, we start by computing the cost of goods sold (COGS). COGS is determined using the following formula:

COGS = Opening Inventory + Purchases - Closing Inventory

So, the COGS for Oliver Brush Company is:

COGS = $10,980 + $73,200 - $8,052 = $76,128

Then, the operating income can be calculated by subtracting the COGS and Selling and Administrative Expenses from Net Sales Revenue:

Operating Income = Net Sales Revenue - COGS - Selling and Administrative Expenses

Operating Income = $146,400 - $76,128 - $52,704 = $17,568

Next, to compute the unit cost for one brush, we divide the COGS by the number of brushes sold:

Unit Cost = COGS / Number of Brushes Sold

Unit Cost = $76,128 / 6,400 = $11.89 per brush

Answer 2

a. $17,568

b. $22.88

Step-by-step explanation:

Income Statement for 2018

Net Sales Revenue $146,400

Less Cost of Goods Sold :

Opening Merchandise Inventory $10,980

Add Purchases $73,200

Less Closing Merchandise Inventory ($8,052) ($76,128)

Gross Profit $70,272

Less Expenses :

Selling and Administrative Expenses ($52,704)

Operating Income $17,568

Unit Cost = Total Sales Revenue / Total Sales Units

= $146,400 / 6,400

= $22.88