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22 June, 11:58

Sales revenue$ 4,000Purchases of direct materials$ 400Direct labor$ 450Manufacturing overhead$ 620Operating expenses$ 650Beginning raw materials inventory$ 200Ending raw materials inventory$ 180Beginning work in process inventory$ 320Ending work in process inventory$ 410Beginning finished goods inventory$ 250Ending finished goods inventory$ 200What was operating income? A) $2,530B) $4,000C) $3,350D) $1,900

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  1. 22 June, 15:03
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    The correct answer is D: $1900

    Explanation:

    Giving the following information:

    Sales revenue$ 4,000

    Purchases of direct materials$ 400

    Direct labor$ 450

    Manufacturing overhead $ 620

    Operating expenses$ 650

    Beginning raw materials inventory$ 200

    Ending raw materials inventory$ 180

    Beginning work in process inventory$ 320

    Ending work in process inventory$ 410

    Beginning finished goods inventory$ 250

    Ending finished goods inventory$ 200

    First, we need to calculate the cost of goods manufactured:

    cost of goods manufactured = beginning work in process + direct materials + direct labor + manufacturing overhead - ending work in process

    Direct materials = beginning inventory + purchase - ending inventory = 200 + 400 - 180 = 420

    cost of goods manufactured = 320 + 420 + 450 + 620 - 410 = $1400

    Now, we can calculate the cost of goods sold:

    COGS = beginning finished inventory + cost of goods manufactured - ending finished goods

    COGS = 250 + 1400 - 200 = 1450

    Operating income = sales - COGS - operating expenses

    Operating income = 4000 - 1450 - 650 = $1900
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