Question

Cook Co. reports the following information for the current year:

Saper Sandpaper $ 17,000
Direct labor 680,000
Small tools 100,000
Materials inventory, Jan 1 120,000
Materials inventory, Dec 31 86,000
Materials purchased 980,000
Machine helpers’ salaries 86,000
Finished Goods, Jan 1 210,000
Finished Goods, Dec 31 400,000
Sales 4,000,000
Leasing costs, plant 120,000
Work-in-process, Jan 1 30,000
Work-in-process, Dec 31 20,000
Depreciation, plant 70,000
Sales Commissions 200,000
Property taxes, plant 10,000
Insurance, factory equipment 5,000
Sales salaries 180,000
Advertising costs 150,000
Office administration costs 250,000
Units completed 82,000
Compute the Net Income (loss) assuming that Cook Co. is in the 30% tax bracket?
a) $1,454,600
b) $1,431,000
c) $1,298,000
d) $908,600

Answer 1

Cook Co.

Net Income

d) $908,600

Step-by-step explanation:

a) Data and Calculations:

Cook Co. Information for the current year:

Materials inventory, Jan 1 120,000

Materials purchased 980,000

Materials inventory, Dec 31 86,000

Materials used 1,014,000

Work-in-process, Jan 1 30,000

Materials used 1,014,000

Direct labor 680,000

Total overhead costs 408,000

Work-in-process, Dec 31 (20,000 )

Cost of production $2,112,000

Finished Goods, Jan 1 210,000

Cost of production 2,112,000

Finished Goods, Dec 31 (400,000 )

Cost of Goods Sold $1,922,000

Manufacturing overhead costs:

Saper Sandpaper $ 17,000

Machine helpers’ salaries 86,000

Small tools 100,000

Leasing costs, plant 120,000

Depreciation, plant 70,000

Property taxes, plant 10,000

Insurance, factory equipment 5,000

Total overhead costs $408,000

Sales Commissions 200,000

Sales salaries 180,000

Advertising costs 150,000

Office administration costs 250,000

Total expenses $780,000

Sales 4,000,000

Cost of Goods Sold $1,922,000

Gross profit $2,078,000

Less expenses 780,000

Profit before tax 1,298,000

Income Tax (30%) 389,400

Net Income $908,000