Information from the records of Island Timberlands Inc. for November is as follows: Sales $820,000
Selling and administrative expenses 140,000
Direct materials purchases 176,000
Direct labour 200,000
Manufacturing overhead 270,000
Direct materials, November 1 24,000
Work-in-process, November 1 50,000
Finished goods, November 1 46,000
Direct materials, November 30 28,000
Work-in-process, November 30 56,000
Finished goods, November 30 38,000
What is the net income for the month of November?
A) $36,000
B) $180,000
C) $636,000
D) $644,000

Question

Quizplus · Accepted Answer

Net income is calculated as Sales minus Cost of Goods Sold (COGS) and Selling and Administrative Expenses. COGS is calculated as: Opening Finished Goods + Cost of Goods Manufactured - Closing Finished Goods. Cost of Goods Manufactured is: Opening WIP + Direct Materials Used + Direct Labour + Manufacturing Overhead - Closing WIP. Direct Materials Used is: Opening Direct Materials + Purchases - Closing Direct Materials. After calculating these, subtract COGS and Selling and Administrative Expenses from Sales to find net income.

Information from the Records of Island Timberlands Inc