Question

As in the previous Participation Exercise, the Khalid Company manufactures and sells Paso-the-Salsa, which is a bottled condiment used on a variety of foods. Each bottle is sold for $5. The company recently had the following costs to produce 12,000 units of its product during August:

A.		Rent of $5,000 on a billboard to help advertise the product
B.		Rent on factory and equipment of $8,000
C.		Total payroll for hourly paid, factory workers $24,000
D.		Tomatoes, onions, spices and bottles $18,000
E.		Total payroll for salaried, administrative staff $6,000

Answer the next three questions below using the data above (along with the appropriate product cost and period cost classifications from the previous Participation Exercise); however, assume that the company only sold 8,000 units of those produced (i.e. 2/3 of the units produced) for the month of August.

What is the company's cost of goods sold for the month (as needed, round your final answer to the nearest whole dollar)?company

What is the company's net income for the month (as needed, round your final answer to the nearest whole dollar)?

What is the company's ending inventory for the month (as needed, round your final answer to the nearest whole dollar)?

Answer 1

1	Cost of Goods Sold:
	Total Production cost
	Rent on factory and Equipment	8000
	Direct Labor	24000
	Material	18000
	Total	50000
	Production Cost per unit	4.17
	(50000/12000)
	Unit Sold	8000
	Cost of Goods Sold	33,360
	(8000*4.17)
2	Net Income for the month:
	Sales Revenue (8000*5)	40000
	Less:
	Cost of Goods Sold	33,360
	Rent expense	5000
	Payroll Expense	6000
	Net Loss	-4,360
3	Ending Inventory (12000-8000)	4000
	Value of Ending Inventor
	(4000*4.17)	16680	($40 Excess due to round off)
	Or
	(50000-3360)	46640

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