Question

In: Accounting

During its first year of operations, Silverman Company paid $12,625 for direct materials and $10,000 for...

During its first year of operations, Silverman Company paid $12,625 for direct materials and $10,000 for production workers' wages. Lease payments and utilities on the production facilities amounted to $9,000 while general, selling, and administrative expenses totaled $4,500. The company produced 5,750 units and sold 3,500 units at a price of $8.00 a unit.

What was Silverman's net income for the first year in operation?

Solutions

Expert Solution

Income Statement

Sales [3,500 x $8.00]

        28,000

Less: Variable Costs

Direct Materials [($12,625/5,750) x 3,500]

           7,685

Production workers' wages [($10,000/5,750) x 3,500]

           6,087

Lease payments and utilities on the production facilities [($9,000/5,750) x 3,500]

           5,478

        19,250

Less: Fixed Costs

General, selling, and administrative expenses

          4,500

Net Income

          4,250

The Silverman's net income for the first year in operation will be $4,250


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