Question

Figure 2-15

Information from the records of Chrome Ponies Enterprises for June 2014 is as follows:

Sales $41,000

Direct labor 10,000

Selling and administrative expenses 7,000

Direct materials purchases 5,000

Factory overhead 11,500

Inventories

June 1, 2014    June 30, 2014

Direct materials                      $1,200           $1,400

Work in process                      2,500               2,800

Finished goods                        2,300               1,900

7. Refer to Figure 2-15. What is the gross margin (profit)?

a.

$11,500

b.

$11,600

c.

$ 14,500

d.

$ 14,600

Answer 1

Calculate cost of goods sold :

Beginning direct material	1200
Direct material purchase	5000
Less: Ending direct material	-1400
Direct material used	4800
Direct labour	10000
Factory overhead	11500
Total manufacturing cost	26300
Beginning work in process	2500
Less; Ending work in process	-2800
Cost of goods manufactured	26000
Beginning finished goods	2300
Less: Ending finished goods	-1900
Cost of goods sold	26400

Gross profit = Sales-Cost of goods sold

= 41000-26400

Gross profit = 14600

So answer is d) $14600