During its first year of operations, Silverman Company paid $10,285 for direct materials and $9,800 for production workers' wages. Lease payments and utilities on the production facilities amounted to $8,800 while general, selling, and administrative expenses totaled $4,300. The company produced 5,450 units and sold 3,300 units at a price of $7.80 a unit.

What was Silverman's net income for the first year in operation? (Do not round intermediate calculations.)

a. $21,440

b. $5,655

c. $16,940

d. $3,950

D.$3,950

Explanation:

Production = ($10,285 + $9,800 + $8,800) ÷ 5,450units

=$28,885÷5,450 units

= $5.3per unit

COGS = 3,300 units sold × $5.3 per unit

= $17,490

Net income = Revenue − Cost of goods sold − Selling and administrative expenses

Net income = (3,300 units × $7.80 per unit) − (3,300 units sold × $5.3per unit) − $4,300

=(25,740-17,490)-$4,300

= 8,250-$4300

=$3,950

Therefore Silverman's net income for the first year in operation is $3,950

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