Chase Toys produces toys for dogs. The following information was available for the month ended November 30, 2013 (assume no beginning or ending raw materials inventory):

Sales Revenue

$ 106,500

Direct materials used

32,000

Direct Labor

16,000

Manufacturing overhead*

17,000

Beginning work-in-process

8,000

Ending work-in-process

6,000

Operating expenses

32,000

Finished goods, Nov. 1, 2013

4,000

Finished goods, Nov. 30, 2013

7,200

*All indirect production costs are included in manufacturing overhead.

Compute operating income for Chase Toys for month ended November 30, 2013.

Net Operating Income $ 10700

Explanation:

Chase Toys

Operating Income

For the month ended November 30, 2013.

Sales Revenue $ 106,500

Direct materials used 32,000

Direct Labor 16,000

Manufacturing overhead * 17,000

Total Manufacturing Costs 65000

Add Beginning work-in-process 8,000

Cost of Goods Available for Manufacture 73000

Less Ending work-in-process 6,000

Cost of Goods Manufactured 67000

Add Finished goods, Nov. 1, 2013 4,000

Cost of Goods Available for Sale 71000

Less Finished goods, Nov. 30, 2013 7,200

Cost of Goods Sold 63,800

Gross Profit 42700

Less Operating expenses 32,000

Net Operating Income $ 10700

Manufacturing head consists of indirect production costs. We subtract the operating expenses to get the operating income.