Chapter 2, Problem 2.22AE

Construct an income statement using product and period costs (Learning Objectives 4 & 5)

Outdoor Amenities is a manufacturer of backyard and deck furniture. Its products are in high demand, and it carries no inventory. Following is a list of selected account balances from its trial balance for the most recent year ended December 31 (in no particular order.)

Salaries and wages (for administrative and sales staff)	$ 37,400
Stain (used in manufacturing furniture)	$ 12,700
Indirect labor costs (wages of maintenance workers in factory)	$ 21,300
Other manufacturing overhead (includes factory insurance and property taxes)	$ 9,800
Rent and utilities (for administrative offices)	$ 12,000
Utility costs (related to factory)	$ 11,200
Labor costs (wages of carpenters who build furniture)	$ 36,900
Accounts receivable	$ 27,100
Marketing costs	$ 17,300
Wood (used in manufacturing furniture)	$ 57,800
Sales revenues	$ 255,000
Accounts payable	$ 7,100

Requirements

Using the income statement accounts in the table, calculate:

1. 1. Cost of goods sold. Hint: Cost of goods sold can be calculated by summing the total product costs since there is no inventory.
2. 2. Operating expenses. Hint: Operating expenses are the company’s period costs.
3. 3. Gross profit
4. 4. Operating income