Question

Cookie Co. expects to maintain the same inventories at the end of 20Y9 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows:

		Estimated Fixed Cost			Estimated Variable Cost (per unit sold)
Production costs:
	Direct materials	—			$26
	Direct labor	—			17
	Factory overhead	$110,600			13
Selling expenses:
	Sales salaries and commissions	23,000			6
	Advertising	7,800			—
	Marketing	1,700			—
	Miscellaneous selling expense	1,900			5
Administrative expenses:
	Office and officers' salaries	22,500			—
	Supplies	2,800			2
	Miscellaneous administrative expense	2,500			3
	Total	$172,800			$72

It is expected that 6,400 units will be sold at a price of $144 a unit. Maximum sales within the relevant range are 8,000 units.

Prepare an estimated income statement for 20Y9.

Cookie Co.

Income Statement

For the Year Ended December 31, 20Y9

Cost of Goods Sold:
Total cost of goods sold
Gross profit
Expenses
Selling expenses:
Total selling expenses
Administrative expenses
Total admin expenses
Total expenses
Operating Income

Answer 1

I have attached the images of the answer with all the calculations and explanation.

As we can see from the above images that the operating income for the year end will be $455500.