mcfarland, inc., is a merchandiser that provided the following information:\nnumber of units sold…
mcfarland, inc., is a merchandiser that provided the following information:\nnumber of units sold 35,000\nselling price per unit $40\nvariable selling expense per unit $3\nvariable administrative expense per unit $1\ntotal fixed selling expense $45,000\ntotal fixed administrative expense $28,000\nbeginning merchandise inventory $21,000\nending merchandise inventory $35,000\nmerchandise purchases $805,000\nrequired:\n1. prepare a traditional income statement.
Answer
Explanation:
Step1: Calculate sales revenue
Sales = Number of units sold × Selling price per unit $\text{Sales} = 35,000 \times 40 = 1,400,000$
Step2: Calculate cost of goods sold
COGS = Beginning inventory + Purchases - Ending inventory $\text{COGS} = 28,000 + 805,000 - 35,000 = 798,000$
Step3: Calculate gross profit
Gross Profit = Sales - COGS $\text{Gross Profit} = 1,400,000 - 798,000 = 602,000$
Step4: Calculate total selling expenses
Total Selling = Variable selling + Fixed selling $\text{Total Selling Expenses} = (35,000 \times 3) + 45,000 = 105,000 + 45,000 = 150,000$
Step5: Calculate total admin expenses
Total Admin = Variable admin + Fixed admin $\text{Total Administrative Expenses} = (35,000 \times 1) + 21,000 = 35,000 + 21,000 = 56,000$
Step6: Calculate total operating expenses
Total Operating = Selling + Admin expenses $\text{Total Operating Expenses} = 150,000 + 56,000 = 206,000$
Step7: Calculate net operating income
Net Income = Gross Profit - Operating Expenses $\text{Net Operating Income} = 602,000 - 206,000 = 396,000$
Answer:
McFarland, Inc.
Traditional Income Statement
| Item | Amount |
|---|---|
| Sales Revenue | $$1,400,000$ |
| Less: Cost of Goods Sold | $$798,000$ |
| Gross Profit | $$602,000$ |
| Less: Operating Expenses | |
| Selling Expenses | $$150,000$ |
| Administrative Expenses | $$56,000$ |
| Total Operating Expenses | $$206,000$ |
| Net Operating Income | $$396,000$ |