Question
Grip 6, is an emerging company that manufactures and sells belts. Ghary is the only employee of Grip 6 and his sole role is to
Grip 6, is an emerging company that manufactures and sells belts. Ghary is the only employee of Grip 6 and his sole role is to make the belts. The belts include two parts: the belt buckle, and the belt strap. To make a belt, the buckle is machined from metal, and then the belt strap is cut to length out of webbing. A completed belt is packaged in single-belt box (i.e. the Packaging Boxes are part of the manufacturing costs).
The belts are made in a warehouse that includes the necessary equipment to machine the belt buckles and cut the belt strap for $15,500 per year. That rent includes the utilities and use of the equipment. The warehouse will also store any materials for no additional charge.
Ghary did one production run in 2015. The Ending Balance of inventory at the end of the run was as follows:
Item
Ending Amount
Ending Balance ($)
Metal
200 oz.
$50
Webbing
400 ft
$800
Packaging Boxes
500
$250
Belts in Process
150
$2,250
Finished Belts (in boxes)
50
$1,250
In 2016, Ghary worked diligently to produce 3,050 additional belts and sold 2,500 belts. The revenue from the sales was $87,500. During 2016, Grip 6 incurred the following expenses:
Item
Expense ($)
Wages to Ghary for Production
$45,000
Rent for the Warehouse
$15,500
Metal
$7,775
Webbing
$12,200
Packaging Boxes
$1,375
Other General and Administrative Expenses
$2500
Delivery Expenses (Shipping)
$1000
Advertising Expenses
$1000
The ending balance at the end of 2016 was as follows:
Item
Ending Amount
Ending Balance ($)
Metal
800 oz.
$200
Webbing
400 ft
$800
Packaging
200
$100
Belts in Process
150
$3,750
Finished Belts (in boxes)
600
$15,678
Please answer the following questions ignoring taxes and assuming that Grip 6 uses Full Absorption costing unless specified otherwise:
What is the total Cost of Goods Manufactured in 2016?
What is the total Cost of Goods Sold in 2016?
What is the Net Income for Grip6 in 2016?(Note: ignore taxes)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started