Question

4. During its first year of operations, The Catazaro Company paid $20,000 for direct material and $50,000 for production workers’ wages. Lease payment and utilities on the production facility amounted to $12,000. General, selling and administrative expenses amounted to $6,000. The company made 20,000 units and sold 18,000 units for $6.50 each. What was the amount of the company’s net income for the first year?

Answer 1

Income Statement

Sales ( 18,000 x 6.50)	117,000
Expenses:
Direct material ( 20,000 x 18,000/20,000)	-18,000
Production workers wages ( 50,000 x 18,000/20,000)	-45,000
Leese payment	-12,000
General selling and administrative expense	-6,000
Net Income	$36,000

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