Brock Company makes candy. During the most recent accounting period Brock paid $3,000 for raw materials, $4,000 for labor, and $2,000 for overhead costs that were incurred to make candy. Brock started and completed 10,000 units of candy of which 8,000 were sold. Based on this information Brock would recognize which of the following amounts of expense on its income statement?
$4,000.
$9,000.
$7,200.
None of the above.
The correct answer is $9,000.
To calculate the expense amount, we need to consider the cost of raw materials, labor, and overhead costs incurred to make candy.
The total cost of making candy can be calculated as follows:
Total Cost = Cost of raw materials + Cost of labor + Overhead costs
Total Cost = $3,000 + $4,000 + $2,000
Total Cost = $9,000
Since 8,000 units were sold, the expense recognized on the income statement would be $9,000.