Question

Walden Company makes and sells wooden furniture. A recent fire destroyed most of the company's accounting record. Mike Lawson, the manager of Walden Company, needs to prepare an income statement for an upcoming meeting with the company's board of directors. Because the key accounts are not usable, Mike asked the company's accountants to obtain necessary information from other sources. After contacting various sources, the company has collected the following information about its activities for 2015. During the year 2015, the company's sales amounted to $600,000. The costs incurred by the company in 2015 were as follows: Raw materials purchased Direct labor (20,000 hours) Indirect labor Equipment rent Factory utilities Miscellaneous factory supplies Building depreciation Property taxes on building Production salaries Administrative salaries Miscellaneous selling and administrative costs $ 70,000 180,000 15,000 25,000 10,000 17,000 15,000 5,000 75,000 120,000 29,000 Inventory balances at the beginning and end of the year were as follows: January 1 December 31 Raw materials $ 21,000 $ 17,000 Work in process 30,000 35,000 Finished goods 45,000 47,000 About sixty percent of the factory building was devoted to manufacturing operations, so 60 percent of building depreciation and property taxes is treated as a factory cost. The company was subject to an income tax rate of 30 percent.

I already created the income statement, but now I need the above question answered. Need help determining how to include the other costs aside from the labor and material costs.

Answer 1

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Walden Company

Here, cost of materials and labor consumed for the job is already given. To calculate total cost of job we need only factory overhead amount. Selling and administrative costs are period costs and will not be added to this job.

For factory overhead we will calculated the overhead application rate on the basis of direct labor cost and then will arrive at the factory overhead cost of the job.

Factory overhead rate	Amount $
Total factory overhead incurred	154,000.00
Total direct labor costs	180,000.00
Factory overhead rate	85.6%
Factory overhead allocated to the job	Amount $
Direct labor costs	20,000.00
Factory overhead rate	85.6%
Factory overhead allocated to the job	17,111.11
Cost of the job	Amount $
Direct Materials	7,000.00
Direct labor costs	20,000.00
Factory overhead allocated	17,111.11
Cost of the job	44,111.11
Add: Profit of 20%	8,822.22
Price for the futons	52,933.33