Racing Bikes Inc. produces custom bicycles for professional racers. Each bike is built to customer specifications. During July, its first month of operations, Racing Bikes began production of four customer orders—Jobs 1 through 4.

The following transactions occurred during July.

(1) Purchased bike parts on account totaling \($14,400.

(2)\) Processed material requisitions for the following items:

(3) Processed timesheets showing the following:

(4) Applied overhead using a predetermined rate of \($30\) per direct labor hour.

(5) Completed and transferred to finished goods Jobs 1, 2, and 3.

(6) Delivered Jobs 1 and 2 to customers, billing them \($6,000\) for Job 1 and \($3,500\) for Job 2.

Required

a. Calculate the production costs incurred in July for each of the four jobs.

b. Make the appropriate journal entry for each transaction described above (1 through 6). Assume all payments will be made next month.

c. How much gross profit did Racing Bikes Inc. earn from the sale of Job2?

d. Assume selling costs totaled \($1,000\) and that general and administrative costs totaled \($2,200.\) Prepare an income statement for Racing Bikes for the month of July. Assume there is no adjustment to cost of goods sold for underapplied or overapplied overhead.

Transcribed Image Text:

Job 1, direct materials $2,800 Job 2, direct materials 1,250 Job 3, direct materials 1,550 Job 4, direct materials 780 Indirect materials Total 1,075 $7,455