27th Edition
WARREN + 5 others
ISBN: 9781337272094




27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Cost of goods sold, profit margin, and net income for a manufacturing company

The following information is available for Bandera Manufacturing Company for the month ending January 31:

Cost of goods manufactured $4,490,000
Selling expenses 530,000
Administrative expenses 340,000
Sales 6,600,000
Finished goods inventory, January 1 880,000
Finished goods inventory, January 31 7750,000

For the month ended January 31, determine Bandera’s (a) cost of goods sold, (b) gross profit, and (c) net income.


To determine

Cost of goods sold:

Cost of goods sold is the accumulate total of all direct cost incurred in manufacturing the goods or the products which has been sold during a period. Cost of goods sold involves direct material, direct labor, and manufacturing overheads.

Net income:

Net income is the total earnings generated by the company. Net income is calculated by deducting the operating expenses from the earnings (Profit).

Netincome = Gross profit – operating expenses

Gross Profit:

Gross Profit is the difference between the net sales, and the cost of goods sold. Gross profit usually appears on the income statement of the company.

To determine: The cost of goods sold for the month ended January 31.


The cost of goods sold is determined as follows:

Particulars $ $
Finished goods inventory, January 1   880,000
Cost of goods manufactured  ...


To determine
The gross profit.


To determine
The net income.

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