To answer these questions you will need to prepare an income statement. To get t

Question

To answer these questions you will need to prepare an income statement. To get the problems correct you will need to determine the Cost of Goods manufactured and the Cost of Goods Sold. To this requires an understanding of the difference between product and period costs.

Choose the best answer below for your determination of the cost of goods sold

a. $575,000

b. $162,000

c. $580,000

d. $737,000

Continuing with the Nicholas Corporation, what is Nicholas Corporation's Net Income? Choose the best answer below.

a. $113,000

b. $97,000

c. $275,000

d. $101,000

e. $575,000

A list of account balances for Nicholas Corporation follow: Revenue and Expenses Purchases of raw materials Direct labor Indirect labor Rent - factory Depreciation machinery January 1 inventories $140,000 Raw materials $45,000 $225,000 Work in process $30,000 $40,000 Finished Goods $105,000 $84,000 $35,000 December 31 inventories Raw materials Insurance - factory $18,000 $40,000 Salesperson's salaries $72,000 Maintenance - machinery Administrative salaries $57,000 Miscellaneous factory Miscellaneous office $45,000 Sales revenues $12,000 Work in process $35,000 Finished goods $110,000 $26,000 $850,000

Explanation / Answer

Direct material used = 45000+140000-40000 = 145000

Manufacturing overhead = 40000+84000+35000+18000+12000+26000 = 215000

Total manufacturing cost = 145000+215000+225000 = 585000

Cost of goods manufactured = 585000+30000-35000 = 580000

Cost of goods sold = 580000+105000-110000 = 575000

So answer is a) $575000

2) Gross profit = 850000-575000 = 275000

Operating expenses = 72000+57000+45000 = 174000

Net income = 275000-174000 = 101000

So answer is d) $101000

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