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 1,330 910 630 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 $3,600 $5,000 $300 $560 $80 Direct labor 1,000 1,400 2,200 1,800 600 850 170 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 20 percent. Required: Prepare an income statement for Cairle Company for August Cairle Company Income Statement

Answer 1

Income Statement
For the month of August
Sales	14070	=11725*1.20
Cost of goods sold	11725
Gross margin	2345
Selling and administrative expenses	1300
Operating income	1045

Workings:
Predetermined overhead rate	70%	=1330/1900
	Job 72	Job 75	Total
Beginning work in process	2380	0		=850+900+630
Direct materials	3600	560
Direct labor	2200	850
Overhead applied (70%)	1540	595
Total cost	9720	2005	11725