Question

1.

Assume that a manufacturing company incurred the following:

Direct labor	$	90,000
Advertising	$	26,000
Factory supervision	$	35,000
Sales commissions	$	15,000
Depreciation, office equipment	$	4,000
Indirect materials	$	5,000
Depreciation, factory building	$	20,000
Administrative office salaries	$	1,000
Utilities, factory	$	2,500
Direct materials	$	105,000
Insurance, factory	$	6,000
Property taxes, factory	$	7,000

What is the total fixed selling and administrative cost?

2.

Assume the following information for a merchandising company:

Number of units sold		20,000
Selling price per unit	$	30
Variable selling expense per unit	$	3.5
Variable administrative expense per unit	$	2.5
Fixed selling expenses	$	30,000
Fixed administrative expenses	$	50,000
Beginning merchandise inventory	$	24,000
Ending merchandise inventory	$	19,000
Merchandise purchases	$	340,000

What is the net operating income?

Answer 1

1)	Calculation of total fixed selling and administrative cost
	Advertising	26,000
	Depreciation, office equipment	4,000
	Administrative office salaries	1,000
	Total fixed selling and administrative cost	31,000
2)	Calculation of net operating income
	Sale Price		600,000
	Less: Cost of Goods sold
	Beginning merchandise inventory	24,000
	Add: Merchandise purchases	340,000
	Less: Ending merchandise inventory	-19,000	345,000
	Variable selling expense		70000
	Variable administrative expense		50000
	Fixed selling expenses		30,000
	Fixed administrative expenses		50,000
	Net Income		55,000