Question

Zippy company manufactured 10,000 units in December with a total product cost of $29,284 They had zero finished goods inventory at the start of December. In December Zippy sold 7,781 units at a unit price of $6.66. Period expenses were $3,731. What is the amount of Zippy's operating income? Round any intermediate calculations to four decimal places.

Answer 1

Closing finished goods (in units) = Opening finished goods + Manufactured during the year - sold during the year
Closing finished goods (in units) = 0 + 10000 - 7781 = 2219
Closing finished goods (in value) = 2219 * ($ 29284 / 10000 units) = $ 6498.1196
Cost of goods sold = Opening finshed goods + Manufactured during the year - Closing finished goods
Cost of goods sold = 0 + $ 29284 - $ 6498.1196 = $ 22785.8804
Operating income = Sales revenue - cost of goods sold - period expenses
Operating income = (7781 units * $ 6.66 ) - $ 22785.8804 - $ 3731 = $ 25304.5796