What is the 2019 Cost of Goods Manufactured for Spinach Oreos
What is the 2019 Cost of Goods Sold for Spinach Oreos
What is the Income from Operations for the Spinach Oreo division
Based on the Income from Operations, was Spinach Oreos a good idea (yes or no)
ANSWER:
(1) Cost of Goods Manufactured = Direct Materials + Direct labor cost + Manufacturing overhead+Beginning WIP Inventory - Ending WIP Inventory
Direct Materials = (5*7,50,000)+ (3*7,50,000) + (0.30* 7,50,000) = 37,50,000 + 22,50,000 + 2,25,000
= 62,25,000
Hours Machine took to produce 7,50,000 units = 7,50,000 / 200 = 3,750
Direct Labor Cost = 0.45 * 7,50,000 = 3,37,500
Factory Overhead cost = 1,250 * No. of Machine Hours = 1,250 * 3,750 = 46,87,500
Ending Inventory WIP = (15,000*5)+(3*15,000)+(0.30*15,000)
= 1,24,500
Cost of Goods Manufactured = 62,25,000 + 3,37,500 + 46,87,500 - 1,24,500
= 1,11,25,500.
(2)Cost Of Goods Sold = Cost of Goods Manufactured - Ending Inventory of Finished goods
Ending Inventory of finished goods = 20,000(7,50,000 - 7,30,000) * 25 = 5,00,000
Cost of Goods Sold = 1,11,25,500 - 5,00,000 = 1,06,25,500
(3)Income From Operations = Gross Profit - Operating Expenses ( Non Manufacturing costs)
Sales - Cost of Goods Sold = Gross Profit = 1,82,50,000 - 1,06,25,500 = 76,24,500
Operating Expenses = Advertising + Promotion + Selling Expenses
= 10,00,000 + 9,00,000 + 56,25,000 = 75,25,000
Income from Operations = 76,24,500 - 75,25,000 = 99,500
(4)Was Spinach Oreos a good Idea: Yes, Spinach Oreo is a good idea since it is landing operational profits to the organisation, and these profits and before taxes henceforth is a great measure for investors to highlight the growth potential of the organizastion. Hence, it was a great idea to manufacture spinach cookies.
Comment for any doubts.
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