Question

The following information is available for Bandera Manufacturing Company for the month ending January 31:

Cost of goods manufactured $4,490,000

Selling expenses 530,000

Administrative expenses 340,000

Sales 6,600,000

Finished goods inventory, January 1 880,000

Finished goods inventory, January 31 775,000

For the month ended January 31, determine Bandera’s (a) cost of goods sold, (b) gross profit, and (c) net income.

Answer 1

Net income : The total earnings generated by the company are referred to as net income. Net income is calculated by subtracting operating expenses from profit.

Net income = Gross profit - operating expenses

Gross profit : The difference between net sales and cost of goods sold is the gross profit. Gross profit is typically reported on a company's income statement.

a) Calculation of Cost of Goods Sold

Particulars	Amount$
Finished goods inventory,January 1	880,000
Cost of goods manufactured	44,90,000
Cost of finished goods available for sale	53,70,000
Less : Finished goods inventory,January 31	7,75,000
Cost of goods sold	45,95,000

(b) Calculation of Gross profit

Particulars	Amount$
Sales	66,00,000
Cost of goods sold	45,95,000
Gross profit	20,05,000

 

(c) Calculation of Net income

Particulars	Amount$	Amount$
Gross profit		20,05,000
Operating Expenses :
Selling Expenses	5,30,000
Administrative Expenses	3,40,000
Total operating expenses		8,70,000
Net income		11,35,000

(a)Therefore, the cost of goods sold for the month ended January 31 is 45,95,000

(b)Therefore, the gross profit is $20,05,000

(c)Therefore, the net income is $11,35,000