Question

Jorgensen Corporation uses standard costs with its job order cost accounting system. In January, an order (Job No. 12) for 2,000 units of Product B was received. The standard cost of one unit of Product B is as follows.

Direct materials		3 pounds at $1.10 per pound		$3.30
Direct labor		1.70 hour at $8.00 per hour		13.60
Overhead		2 hours (variable $4.40 per machine hour; fixed $2.70 per machine hour)		14.20
Standard cost per unit				$31.10

Normal capacity for the month was 4,470 machine hours. During January, the following transactions applicable to Job No. 12 occurred.

1.		Purchased 6,400 pounds of raw materials on account at $1.18 per pound.
2.		Requisitioned 6,400 pounds of raw materials for Job No. 12.
3.		Incurred 3,480 hours of direct labor at a rate of $7.95 per hour.
4.		Worked 3,480 hours of direct labor on Job No. 12.
5.		Incurred manufacturing overhead on account $30,480.
6.		Applied overhead to Job No. 12 on basis of standard machine hours allowed.
7.		Completed Job No. 12.
8.		Billed customer for Job No. 12 at a selling price of $180,000.

Prepare the January 2020 income statement for management. Assume selling and administrative expenses were $2,100. JORGENSEN CORPORATION Income Statement

Answer 1

ANSWER

	Income statement for the month of Jan
	Sales Revenue		$180,000
	Cost of Goods Sold		$62,200
	Gross Profit		$117,800
	Variance:
	Material Price Variance	$512
	Material Quantity Variance	$440
	Labor Price Variance	-$174
	Labor Quantity Variance	$640
	Overhead Variacne	$2,080
	Total Variance		$3,498
	Gross Profit (Actual)		$121,298
	Selling and Administrative expense		$0
	Net Income		$121,298

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