Cromuel Corporation has provided the following data for January. The beginning balance in the raw materials inventory account was $27,000. During the month, the company made raw materials purchases amounting to $50,000. At the end of the month, the balance in the raw materials inventory account was $24,000. Direct labor cost was $53,000 and manufacturing overhead was $70,000. The beginning balance in the work in process account was $14,000 and the ending balance was $12,000. The beginning balance in the finished goods account was $33,000 and the ending balance was $51,000. Sales totaled $270,000. Selling expense was $21,000 and administrative expense was $48,000.
-The net operating income for January was:
A) $41,000
B) $78,000
C) $110,000
D) $28,000

Question

Quizplus · Accepted Answer

To calculate the net operating income, we need to start with the company's revenues and deduct all of its expenses.

Revenue: $270,000

Cost of goods sold: 
Beginning raw materials inventory: $27,000 
Raw materials purchased: $50,000 
Ending raw materials inventory: -$24,000 
Raw materials used: $53,000 
Direct labor: $53,000 
Manufacturing overhead: $70,000 
Total manufacturing costs: $176,000

Beginning work in process: $14,000 
Ending work in process: -$12,000 
Cost of goods manufactured: $178,000

Gross profit: $92,000

Operating expenses: 
Selling expense: -$21,000 
Administrative expense: -$48,000 
Total operating expenses: -$69,000

Net operating income: $92,000 - $69,000 = $41,000

Cromuel Corporation Has Provided the Following Data for January