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DETERMINE AND RECORD JOB COSTS

Divine Homes manufactures prefabricated chalets in Colorado. The company uses a perpetual inventory system and a job costing system in which each chalet is a job. The following events occurred during May:

a. Purchased materials on account, $480,000.

b. Incurred total manufacturing wages of $116,000, which included both direct labour and indirect labour. Used direct labour in manufacturing as follows:

Direct Labour

Chalet 13 ...................... $14,300 Chalet 14 ...................... 28,700 Chalet 15 ...................... 19,100 Chalet 16 ...................... 21,500 c.Requisitioned direct materials in manufacturing as follows:

Direct Materials

Chalet 13 ...................... $41,900 Chalet 14 ...................... 56,900 Chalet 15 ...................... 62,400 Chalet 16 ...................... 66,800 d. Depreciation of manufacturing equipment used on different chalets, $6,700.

e. Other overhead costs incurred on Chalets 13-16:

Equipment rentals paid in cash ...................... $10,800 Prepaid plant insurance expired ...................... 3,000 f. Allocated overhead to jobs at the predetermined rate of 60% of direct labour cost.

g. Chalets completed: 13, 15, and 16.

h. Chalets sold on account: #13 for $97,000; #16 for $149,000.

Requirements 1. Record the events in the general journal.

2. Post the appropriate entries to the T-accounts, identifying each entry by letter. Determine the ending account balances, assuming that the beginning balances were zero.

3. Add the costs of the unfinished chalet, and show that this total amount equals the ending balance in the work in process inventory account.

4. Summarize the job cost of the completed chalet that has not yet been sold and show that this equals the ending balance in finished goods inventory.

5. Compute gross profit on each chalet that was sold. What costs must gross profit cover for Divine Homes?

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