Problem:

Hampton Company had the following inventory balances at the beginning and end of the year:

• January 1st - Decemeber 31
• Raw Material $50,000 - $35,000
• Work in process 130,000 - 255,000

During the year, the company purchased $100,000 of raw material and spent $340,000 on direct labor. Other data: manufacturing overhead incurred, $450,000; sales, $1,560,000; selling and administrative expenses, $90,000; income tax rate, 30%.

Required:

Question 1: Calculate cost of goods manufactured.

Question 2: Calculate cost of goods sold.

Question 3: Determine Hampton's net income.

Note: Provide support for your rationale.