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Q17E

Expert-verified
Horngren'S Financial And Managerial Accounting
Found in: Page 891

Short Answer

Selected data for three companies are given below. All inventory amounts are ending balances and all amounts are in millions.

Company A Company B Company C

Cash $ 6 Wages Expense $ 12 Administrative Expenses $ 4

Net Sales Revenue 48 Equipment 32 Cash 25

Finished Goods Inventory 10 Accounts Receivable 8 Net Sales Revenue 75

Cost of Goods Sold 23 Service Revenue 65 Selling Expenses 8

Selling Expenses 4 Cash 34 Merchandise Inventory 12

Equipment 67 Rent Expense 12 Equipment 55

Work-in-Process Inventory 9 Accounts Receivable 19

Accounts Receivable 14 Cost of Goods Sold 25

Cost of Goods Manufactured 23

Administrative Expenses 7

Raw Materials Inventory 6

Identifying differences between service, merchandising, and manufacturing companies Using the data on the previous page, calculate operating income for each company.

The net operating income of company A is $14, company B is $41 and company C is $38.

See the step by step solution

Step by Step Solution

Step-by-Step SolutionStep 1 : Company A

Calculation of Operating Income for Company A

Amount ($)

Amount ($)

Net Sales

$48

Less Cost of goods sold

$23

Gross Profit

$25

Selling and administrative expenses

Selling Expense

$4

Administrative Expense

$7

Total selling and admin expense

$11

Operating Income

$14

Step 2 Company B

Calculation of Operating Income for Company B

Amount ($)

Amount ($)

Service Revenue

$65

Less Wages

$12

Gross Profit

$53

Selling and administrative expenses

Rent Expense

$12

Total selling and admin expense

$12

Operating Income

$41

Step 3 Company C

Calculation of Operating Income for Company C

Amount ($)

Amount ($)

Net Sales

$75

Less Cost of goods sold

$25

Gross Profit

$50

Selling and administrative expenses

Selling Expense

$8

Administrative Expense

$4

Total selling and admin expense

$12

Operating Income

$38

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