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Calculation of Operating Income

Bob's Backpacks manufactures school backpacks adorned with movie-theme logos. During the first quarter of the year, the company had the following costs:

Direct materials used $51,500
Direct labor 39,000
Factory rent 73,500
Factory equipment depreciation 13,500
Office equipment depreciation 1,100
Marketing expenses 5,800
Administrative expenses 15,500

The company had no beginning or ending work in process inventory and no beginning finished-goods inventory. Although 7,600 units were started and finished during the quarter, just 4,900 were sold, for an average price of $32 each.


Calculate Bob's Backpacks' operating income for the first quarter. If required, round your interim calculations to the nearest whole number.


Solution Preview

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Sales 4,900 x 32 = 156,800
Direct materials 51,500
Labor 39,000
Rent 73,500
Depreciation/equip. 13,500
Depreciation/Office 1,100
Marketing 5,800
Administrative 15,500
Expenses = 199,900
Operating loss ($43,100)
* To determine the ...

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