Question

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The following information is obtained from the records of Kaiser Company:

1. On January 1, 2017 the following machines were acquired for cash:

Production machines costs	$ 6,000
Marketing machines costs	$ 3,000
Administrative machines costs	$1,500

     The expected useful life of all machines is five years, no salvage value, and the               firm uses the straight-line method.

2.      On January 2, the firm purchased for cash raw materials at cost of $5,000.

3.      On January 3, the following materials were issued for use:

Production machines costs	$ 2,000
Marketing machines costs	$ 500
Administrative machines costs	$250

4. On January 14, the company paid the payroll:

Production machines costs	$ 3,000
Marketing machines costs	$2,000
Administrative machines costs	$1,500

5. On January 18, the firm paid the following expenses:

Production machines costs	$500
Marketing machines costs	$300
Administrative machines costs	$200

6. Cash sales during January were $15,000.

7. A fire destroyed raw material of $100.

4.      How much is the amount of product cost?

How much is the amount of period cost?

How much is the amount of loss?

How much is the Gross Profit?

How much is the Net Income From Operation?

How much is the Net Income Before Tax?

Answer 1

Total amount of product cost :

Raw material purchased = $5000

(-) Materials issued for

use of:

production machine = ($ 2000)

Marketing machine = ($500)

Administrative machine = ($ 250)

-----------

$ 2250

  

Amount of the period cost :

Depriciation cost ( SLM basis) -

Depriciation on production machine cost = $6000 / 5 years

= $1200

Depriciation on Marketing machine cost = $ 3000/ 5 years

= $ 600

Depriciation on admiistrative machine cost = $ 1500 / 5 years

= $ 300

Total depriciation cost =$ 2100

General & Administration Expenses -

production machine cost = $ 3000

Add:Marketing machine

cost = $ 2000

Add:Administrative

machine costs = $ 1500

-------------

$ 6500

Executive & Administrative expenses :

Production machine cost $500

Add:Marketing machine cost $300

Add:Administrative expenses $200

----------

$1000

Total amount of loss:

Sales Price = $ 15000 - $ 7600

= $ 7400

Gross profit = Sales - COGS

= $15000 - ($ 2750 -$ 100)

= $ 12350