Question

Wolsey Industries Inc. expects to maintain the same inventories at the end of 20Y3 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows:

1		Estimated Fixed Cost	Estimated Variable Cost (per unit sold)
2	Production costs:
3	Direct materials	—	$56.00
4	Direct labor	—	34.00
5	Factory overhead	$188,000.00	20.00
6	Selling expenses:
7	Sales salaries and commissions	102,000.00	6.00
8	Advertising	39,000.00	—
9	Travel	12,000.00	—
10	Miscellaneous selling expense	7,400.00	1.00
11	Administrative expenses:
12	Office and officers’ salaries	141,200.00	—
13	Supplies	8,000.00	2.00
14	Miscellaneous administrative expense	13,600.00	1.00
15	Total	$511,200.00	$120.00

It is expected that 21,300 units will be sold at a price of $160 a unit. Maximum sales within the relevant range are 25,825 units.

1. Prepare an estimated income statement for 20Y3. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Enter all amounts as positive values.

Labels and Amount Descriptions
Advertising
Contribution margin
Cost of goods sold
Direct labor
Direct materials
Expenses
Factory overhead
Gross profit
Income from operations
Manufacturing margin
Miscellaneous administrative expense
Miscellaneous selling expense
Office and officers’ salaries
Sales
Sales salaries and commissions
Supplies
Total administrative expenses
Total cost of goods sold
Total expenses
Total selling expenses
Travel
Variable cost of goods sold

X

Income Statement

1. Prepare an estimated income statement for 20Y3. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Enter all amounts as positive values.

Answer 1

Prepare estimated income statement

Sales (21300*160)		3408000
Cost of goods sold (21300*110+188000)		2531000
Gross profit		877000
Selling and administrative expense
Sales salaries and commissions (102000*21300*6)	229800
Advertising	39000
Travel	12000
Miscellaneous selling expense (102000*1+7400)	109400
Total Selling expense		390200
Office and officers’ salaries	141200
Supplies (21300*2+8000)	50600
Miscellaneous administrative expense (13600+21300)	34900
Total administrative expense		226700
Total Expense		616900
Income from operation		260100