Question

Echo Ridge Homes manufactures prefabricated chalets in Colorado. The company uses a perpetual inventory system and a job cost system in which each chalet is a job. The following events occurred during May:
a. Purchased materials on account, $ 440,000.
b. Incurred total manufacturing wages of $ 114,000, which included both direct labor and indirect labor. Used direct labor in manufacturing as follows:

Direct Labor
Chalet 13............................................................................ $ 14,800
Chalet 14............................................................................ $ 28,500
Chalet 15............................................................................ $ 19,900
Chalet 16............................................................................ $ 21,400

c. Requisitioned direct materials in manufacturing as follows:

Direct Materials
Chalet 13............................................................................ $ 41,700
Chalet 14............................................................................ $ 56,400
Chalet 15............................................................................ $ 62,000
Chalet 16............................................................................ $ 66,300

d. Depreciation of manufacturing equipment used on different chalets, $ 6,300.
e. Other overhead costs incurred on Chalets 13– 16:
Equipment rentals paid in cash.......................................... $ 10,500
Prepaid plant insurance expired........................................ $ 9,000

f. Allocated overhead to jobs at the predetermined rate of 60% of direct labor cost.
g. Chalets completed: 13, 15, and 16.
h. Chalets sold on account: 13 for $ 97,000; 16 for $ 146,000.

Requirements
1. Record the events in the general journal.
2. Post the appropriate entries to the T- accounts, identifying each entry by letter. Deter-mine the ending account balances, assuming that the beginning balances were zero.
3. Add the costs of the unfinished chalet, and show that this total amount equals the ending balance in the Work in Process Inventory account.
4. Summarize the job cost of the completed chalet that has not yet been sold and show that this equals the ending balance in Finished Goods Inventory.
5. Compute gross profit on each chalet that was sold. What costs must gross profit cover for Echo Ridge Homes?



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  • CreatedAugust 27, 2014
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