Vacation Homes manufactures prefabricated chalets in Utah. The company uses a job order costing system in which each chalet is a job. The following events occurred during May.

a. Purchased materials on account, $405,000.

b. Incurred manufacturing wages of $l 12,000. Requisitioned direct materials and used direct labor in manufacturing:

c. Depreciation of manufacturing equipment, $20,000.

d. Other overhead costs incurred on chalets 20 through 23:

e. Allocated overhead to jobs at the predetermined rate of 60% of direct labor cost.

f. Chalets completed: 20, 22, and 23.

g. Chalets sold: 20 for $99,000; 23 for $141,900.

Requirements 

1. Record the preceding events in the general journal,

2. Open T-accounts for Work in Process Inventory and Finished Goods Inventory. Post the appropriate entries to these 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 equals the ending balance in Work in Process Inventory,

4. Add the 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 the gross profit on each chalet that was sold. What costs must the gross profit cover for Vacation Homes?

Transcribed Image Text:

Direct Materials Direct Labor Chalet 20 $41,000 $15,000 Chalet 21 56,000 29,000 Chalet 22 62,000 19,000 Chalet 23 66,000 21,000