Question

The following data is provided MCGA Ltd:

Direct Labour $30,100
Purchase of raw materials $52,890
Factory Management monthly salary        $ 12,900
Repair for factory (50%) and office (50%) $ 5,160
Advertising expense $38,700
Factory Insurance $387
Sales person, salaries $ 21,500
Rent for factory machinery $   9,890
Factory supplies $ 1,978
Depreciation, office equipment $ 1,505
Depreciation, factory equipment $ 9,030
Beg, Raw Materials $ 3,440
Ending, Raw Materials $ 7,095
Beg, Work-in-Process $ 4,300
Ending, Work-in-Process $ 2,215
Beg, Finished Goods $ 9,998
Ending, Finished Goods $ 16,383
Sales Revenue $1,075,000

  Please calculate the Net Income

Answer 1

Calculation of cost of goods sold

Particulars	$	$
Purchase of raw materials	52,890
Add raw materials, beginning	3,440
Raw materials available for production	56,330
Less Raw materials ending	7,095
Raw materials used for production		49,235
Direct labour		30,100
Prime cost		79,335
Factory overhead:
Rent for factory	9,890
Factory repair	2,580
Depreciation factory equipment	9,030
Factory management monthly salaries	12,900
Factory insurance	387
Factory supplies	1,978
Total factory overhead		36,765
Total manufacturing cost		116,100
Add work in process, beginning		4,300
		120,400
Less work in process, ending		2,215
Cost of goods manufactured		118,185
Add finished goods inventory beginning		9,998
Cost of goods available for sales		128,183
Less Finished goods inventory ending		16,383
Cost of goods sold		111,800

Calculation of Net income

Particulars	$	$
Sales		1,075,000
Less cost of goods sold		111,800
Gross profit		963,200
Operating expenses:
Office equipment depreciation	1,505
Advertising expense	38,700
Sales person salaries	21,500
Factory repair	2,580
Less total operating expenses		64,285
Net profit		898,915

Net income of MCGA Ltd is 898,915. Repair expenses $2,580 is allocated to both factory overhead and operating expenses.