Question

In its first year of operations, Baker Inc. paid $11,000 for direct materials used in its production facilities. Baker also paid $8,000 for factory workers'
wages. Depreciation and rental payments related to the production factory amounted to $5,000. Baker also incurred general and administrative expenses in the
amount of $11,000. The company produced 8,000 units and sold 6,000 units at a price of $9.00 a unit.

A) What is the Cost of Goods Sold for the year?

B) What is the Net Income for the year?

C) What value would be assigned to Ending Inventory?

Answer 1

Requirement A
Cost of Goods Sold :
Direct Materials	11000
Factory worker wages	8000
Depreciation and rental payments	5000
Cost of Goods manufactured	24000
Number of units produced	8000
Cost of Goods manufactured per unit	3
Cost of Goods Sold (6000 X$ 3 )	18000
Requirement B
Sales (6000 X$9)	54000
Less: Cost of Goods Sold	18000
Gross Profit	36000
Less:General and administrative expenses	11000
Net income	25000
Requirement C
Ending Inventory (2000 X$3 )	6000