Birmingham Contractors uses a job order costing system. In May 2010, the company made a $3,300,000 bid


Birmingham Contractors uses a job order costing system. In May 2010, the company made a $3,300,000 bid to build a pedestrian overpass over the beach highway at Gulf Shores, Alabama. Birmingham Contractors won the bid and assigned #515 to the project. Its completion date was set at December 15, 2010. The following costs were estimated for completion of the overpass: $1,240,000 for direct material, $670,000 for direct labor, and $402,000 for overhead.

During July, work began on job #515; direct material cost assigned to Job #515 was $121,800, and direct labor cost associated with it was $175,040. The firm uses a predetermined OH rate of 60 percent of direct labor cost. Birmingham Contractors also worked on several other jobs during July and incurred the following costs:

Direct material (including Job #515) issued ......$579,300

Direct labor (including Job #515) accrued ...... 584,000

Indirect labor accrued .............. 55,800

Administrative salaries and wages accrued ...... 39,600

Depreciation on construction equipment ....... 26,400

Depreciation on office equipment ........... 7,800

Client entertainment (on accounts payable) ....... 11,100

Advertising for firm (paid in cash) .......... 6,600

Indirect material (from supplies inventory) ....... 18,600

Miscellaneous expenses (design-related; to be paid

in the following month) ........... 10,200

Accrued utilities (for office, $1,800;

for construction, $5,400).......... 7,200

During July, Birmingham Contractors completed several jobs that had been in process before the beginning of the month. These completed jobs sold for $1,224,000 and payment will be made to the company in August. The related job cost sheets showed costs associated with those jobs of $829,000. At the beginning of July, Birmingham Contractors had Work in Process Inventory of $871,800.

a. Prepare a job order cost sheet for Job #515, including all job details, and post the appropriate cost information for July.

b. Prepare journal entries for the preceding information.

c. Prepare a Cost of Goods Manufactured Schedule for July for Birmingham Contractors.

d. Assuming that the company pays income tax at a 40 percent rate, prepare an income statement for Birmingham Contractors.

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Cost Accounting Foundations and Evolutions

ISBN: 978-1111626822

8th Edition

Authors: Michael R. Kinney, Cecily A. Raiborn

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