Question

Income Statement

Predetermined Overhead Rate, Application of Overhead to Jobs, Job Cost, Unit Cost

On August 1, Cairle Company’s work-in-process inventory consisted of three jobs with the following costs:

	Job 70	Job 71	Job 72
Direct materials	$1,700	$2,000	$850
Direct labor	1,900	1,300	900
Applied overhead	1,520	1,040	720

During August, four more jobs were started. Information on costs added to the seven jobs during the month is as follows:

	Job 70	Job 71	Job 72	Job 73	Job 74	Job 75	Job 76
Direct materials	$800	$1,235	$3,500	$5,000	$300	$560	$80
Direct labor	1,000	1,400	2,200	1,800	600	900	180

Before the end of August, Jobs 70, 72, 73, and 75 were completed. On August 31, Jobs 72 and 75 were sold.

Cairle’s selling and administrative expenses for August were $1,300. Assume that Cairle prices its jobs at cost plus 30 percent.

Required:

Prepare an income statement for Cairle Company for August.

Cairle Company
Income Statement
For the Month of August
	$
	$
	$

Options for Income Statement:

• Cost of goods sold
• Gross margin
• Operating income
• Operating Loss
• Sales
• Selling and administrative expenses

Answer 1

Prepare an income statement for Cairle Company for August.

Cairle Company
Income Statement
For the Month of August
Sales (9930+2180)*1.30	$15743
Cost of goods sold	12110
Gross profit	$3633
Selling and administrative expenses	1300
Operating income	$2333

Working note : Cost of Job 72 and Job 75

	Job 72	Job 75
Beginning WIP	2470
Direct material	3500	560
Direct labor	2200	900
Overhead	1760	720
Total	9930	2180