Answer:
Sales= 160,000
COGS= (40,000 + 50,000)= (90,000)
Gross profi= 70,000
Other expenses:
Fixed selling and administrative costs= (16,000)
Variable selling and administrative costs= (13,000)
Net operating income= $41,000
Explanation:
Giving the following information:
$50,000 of the fixed product cost
$40,000 of variable product cost during its first year of operation.
$16,000 of the fixed selling and administrative costs
$13000 of variable selling and administrative costs.
The company sold all of the units it produced for $160,000
Under GAAP requirements, the income statement follows this structure:
Sales Revenue
(Cost of goods sold)
=Gross profit
(Operating expenses)
Income from other Operations
= Earnings before interest and taxes (EBIT)
(interest)
= Earnings before Tax
(Tax)
=Net operating income
In the example:
Sales= 160,000
COGS= (40,000 + 50,000)= (90,000)
Gross profi= 70,000
Other expenses:
Fixed selling and administrative costs= (16,000)
Variable selling and administrative costs= (13,000)
Net operating income= $41,000
The income statement using the format required by generally accepted accounting Principles (GAAP) is $41,000.
AJ Manufacturing company Income Statement as per GAAP
Revenue $160,000
Less Cost of goods sold ($90,000)
($50,000+$40,000)
Gross Profit $70,000
($160,000-$90,000)
Less Selling and admin cost ($29,000)
($16,000+$13,000)
Net Operating Income $41,000
($90,000-$29,000)
Inconclusion the income statement using the format required by generally accepted accounting Principles (GAAP) is $41,000.
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