Gluth Corporation has provided the following data for the month of July. The beginning balance in the finished goods inventory account was $56,000 and the ending balance was $49,000. Sales totaled $290,000. Cost of goods manufactured was $147,000, selling expense was $17,000, and administrative expense was $68,000.
-The net operating income for July was:
A) $58,000
B) $143,000
C) $150,000
D) $51,000

Question

Quizplus · Accepted Answer

Net operating income can be calculated using the following formula:

Net operating income = Sales revenue - Cost of goods sold - Selling and administrative expenses

Cost of goods sold can be calculated by adding the decrease in finished goods inventory to the cost of goods manufactured:

Cost of goods sold = Cost of goods manufactured + Beginning finished goods inventory - Ending finished goods inventory
Cost of goods sold = $147,000 + $56,000 - $49,000 = $154,000

Substituting the values in the formula, we get:

Net operating income = $290,000 - $154,000 - $17,000 - $68,000
Net operating income = $51,000

Therefore, the net operating income for July was $51,000, which is option D.

Gluth Corporation Has Provided the Following Data for the Month