Question

8. If the cost of goods sold is $100,000, sales are $200,000, merchandise purchases are $37,000, and ending merchandise inventory is $10,000, then the beginning merchandise inventory must be:

9.

A merchandiser plans to sell 14,600 units next month at a selling price of $110 per unit. It also gathered the following cost estimates for next month:

Cost	Cost Formula
Cost of goods sold	$60 per unit sold
Advertising expense	$150,000 per month
Depreciation expense	$70,000 per month
Shipping expense	$100,000 per month + $10 per unit sold
Administrative salaries	$50,000 per month
Sales commissions	5% of sales
Insurance expense	$15,000 per month

What is the estimated net operating income for next month?

10. if the net operating income is $10,000, the contribution margin is $40,000, and the variable expenses are $31,000, then the sales must be:

11. If the conversion costs are $70,000, manufacturing overhead costs are $21,500, and direct material costs are $37,000, then the prime costs must be:

Answer 1

Answer- 8)- The beginning merchandise inventory must be = $23000.

Explanation – Cost of goods sold = Beginning merchandise inventory+ Merchandise purchases - Ending merchandise inventory

$100000 = Beginning merchandise inventory +$37000 - $10000

Beginning merchandise inventory = $100000- $37000 + $10000

= $73000

9)- The estimated net operating income for next month is = $83700.

Explanation-

Net Operating Income
Particulars		Amount
		$
Sales	14600 units*$110 per unit	1606000
Less- Variable expenses
Cost of goods sold	14600 units*$60 per unit	876000
Shipping expenses	14600 units*$10 per unit	146000
Sales commissions	$1606000*5%	80300
Contribution margin		503700
Less- Fixed expenses
Advertising expense		150000
Depreciation expense		70000
Shipping expenses		100000
Administrative salaries		50000
Insurance expense		15000
Net operating income		83700

10)- Sales = Contribution margin + Variable expenses

= $40000+$31000

= $71000

11)- Prime costs = Direct materials+ Direct labor

= $37000+$48500

= $85500

Where- Conversion costs = Direct labor+ Manufacturing overhead costs

$70000 = Direct labor +$21500

Direct labor = $70000 -$21500

= $48500