To calculate the income statement of Oakdale tools and dies .
The income statement shows the revenue earned and expenses earned for a period. If revenue is more than expenses than the income statement will show net operating profit and if expenses are more than income it will show net operating loss
To following steps are followed to arrive at income statement
Step 1 – first calculate the cost of goods manufactured. The formula is given below
Cost of goods manufactured = Direct material expenses used in production + direct labor expenses+ manufacturing overheads + ( Opening Work in progress – Closing work in progress )
In manufacturing overheads the expenses related to factory are only taken
The statement of cost of goods manufactured is calculated below
| Oakdale tools and dies |
| Schedule of Cost of Goods Manufactured( 1 Jan to 31 december) |
| Direct materials: |
Amount(in $000) |
| Raw materials inventory, beginning |
36 |
|
| Add: Purchases of raw materials |
10,950 |
|
| Raw materials available for use |
10,986 |
|
| Deduct: Raw materials inventory, ending |
42 |
|
| Raw materials used in production |
|
$10,944 |
| Direct labor |
|
2,520 |
| Manufacturing overhead: |
|
|
| Indirect factory labor |
2,736 |
|
| Factory supervision |
1,470 |
|
| Indirect materials and supplies |
2,055 |
|
| Building utilities (90%) |
3,375 |
|
| Building & machine depreciation (75%) |
2,025 |
|
| Property taxes—factory (80%) |
2,016 |
|
| Total overhead costs |
|
13,677 |
| Total manufacturing costs |
|
27,141 |
| Add: Work in process, beginning |
|
96 |
|
|
27,237 |
| Deduct: Work in process, ending |
|
87 |
| Cost of goods manufactured |
|
$27,150 |
Second step is to calculated cost of goods sold . the formula is given below
Cost of goods sold = Opening finished goods inventory + cost of goods manufactured – closing finished goods inventory
The calculation of cost of goods sold is given below
| Oakdale tools and dies |
| Schedule of Cost of Goods sold( 1 Jan to 31 december) |
| Finished goods inventory, beginning |
|
162 |
| Add: Cost of goods manufactured |
|
27,150 |
| Goods available for sale |
|
27,312 |
| Deduct: Finished goods inventory, ending |
|
195 |
| Cost of goods sold |
|
27,117 |
The final step is to calculate the income statement which is only possible if cost of goods sold amount is calculated and the income statement is calculated below
| Oakdale tools and dies |
| Income statement( 1 Jan to 31 december) |
|
|
|
| Sales |
|
38190 |
| less – Cost of goods sold |
|
27,117 |
| Gross Margin |
|
$11,073 |
|
|
|
| Less -Selling and administrative expenses |
|
|
| marketing cost |
2613 |
|
| administrative expense |
4800 |
7413 |
|
|
|
| Net operating income |
|
$3,660 |
