Rooney Corporation builds sailboats. On January 1, 2019, thecompany had the following account balances: $75,000 for both cashand common stock. Boat 25 was started on February 10 and finishedon May 31. To build the boat, Rooney had incurred cash costs of$5,800 for labor and $5,650 for materials. During the same period,Rooney paid $7,500 cash for actual manufacturing overhead costs.The company expects to incur $156,000 of indirect overhead costduring 2019. The overhead is allocated to jobs based on directlabor cost. The expected total labor cost for the year is$120,000.
Rooney uses a just-in-time inventory management system.Consequently, it does not have raw materials inventory. Rawmaterials purchases are recorded directly in the Work in ProcessInventory account.
Required
Use the horizontal financial statements model, to recordRooney’s business events. The first row shows beginningbalances.
If Rooney desires to earn a profit equal to 10 percent of cost,for what price should it sell the boat?
If the boat is not sold by year-end, what amount would appear inthe Work in Process Inventory and Finished Goods Inventory on thebalance sheet for Boat 25?
Is the amount of inventory you calculated in Requirementc the actual or the estimated cost of the boat?
| Cash | + | Work in Process | + | Finished Goods | + | Manufacturing Overhead | = | Common Stock | + | Retained earnings | | Revenue | - | Expense | = | Net Income | | 75,000 | + | | + | | + | | = | 75,000 | + | | | | - | | = | | | + | | + | | + | | = | | + | | | | - | | = | | | + | | + | | + | | = | | + | | | | - | | = | | | + | | + | | + | | = | | + | | | | - | | = | | | + | | + | | + | | = | | + | | | | - | | = | | | + | | + | | + | | = | | + | | | | - | | = | | | + | | + | | + | | = | | + | | | | - | | = | |
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- If Rooney desires to earn a profit equal to 10 percentof cost, for what price should it sell the boat? (Do not roundintermediate calculations. Round your final answer to 2 decimalplaces.) _____
- Required C:
- If the boat is not sold by year-end, what amount wouldappear in the Work in Process Inventory and Finished GoodsInventory on the balance sheet for Boat 25? (Do not roundintermediate calculations.)
- Required D:
- Is the amount of inventory you calculated inRequirement c the actual or the estimated cost of theboat?
