Problem 2-14 (45 minutes)
1.
House Of Organs, Inc.
Traditional Income Statement
For the Month Ended November 30
Sales (60 organs × $2,500 per organ) …………….
$150,000
Cost of goods sold
(60 organs × $1,500 per organ) ………………….
90,000
Gross margin …………………………………………….
60,000
Selling and administrative expenses:
Selling expenses:
Advertising …………..………………………………
$ 950
Delivery of organs
(60 organs × $60 per organ) ………………….
3,600
Sales salaries and commissions
[$4,800 + (4% × $150,000)] …………………
10,800
Utilities ………………………………………………..
650
Depreciation of sales facilities …..………………
5,000
Total selling expenses …………………………..…..
21,000
Administrative expenses:
Executive salaries …………………………………..
13,500
Depreciation of office equipment ……………….
900
Clerical
[$2,500 + (60 organs × $40 per organ)] ….
4,900
Insurance …………………………………………….
700
Total administrative expenses ……………………..
20,000
Total selling and administrative expenses …………
41,000
Net operating income ………………………………….
$ 19,000
Problem 2-17 (continued)
3. Total factory overhead cost at 65,000 machine-hours is:
Indirect materials (65,000 MHs ×
1.50 pesos per MH) …………………..
97,500
pesos
Rent …………………………………………
130,000
Maintenance:
Variable cost element (65,000 MHs
× 0.40 peso per MH) ……………….
26,000
pesos
Fixed cost element …………………….
30,000
56,000
Total factory overhead cost …………...
283,500
pesos
