Farm Equipment, Inc., produces tractors and other farm machinery. Each piece of equipment is built to customer specifications. During May, its first month of operations, Farm Equipment, Inc., began working on three customer orders: jobs 1, 2, and 3. The following transactions occurred during May:

1. Purchased production materials on account totaling $450,000

2. Processed material requisitions for the following items:

3. Processed timesheets showing the following:

4. Applied overhead using a predetermined rate of 160 percent of direct labor cost

5. Completed job 1 and transferred it to finished goods

6. Delivered job 1 to the customer and billed her $140,000. (Hint: Two entries are requiredone for the cost of the goods and another for the revenue.)

Required:

1. Calculate the production costs incurred in May for each of the three jobs.

2. Make the appropriate journal entry for each item described previously. Assume all payments will be made next month. (Hint: Use Figure 2.7 "Custom Furniture Companys Journal Entries for May" as a guide.)

3. How much gross profit did Farm Equipment, Inc., earn from the sale of job 1?

4. Assuming selling costs totaled $4,000 and general and administrative costs totaled $11,000 in May, prepare an income statement for Farm Equipment, Inc., for the month. (Assume there is no adjustment to cost of goods sold for underapplied or overapplied overhead.)

Job 1 direct materials Job 2 direct materials Job 3 direct materials Indirect materials Total $ 77,600 38,600 45,000 87,000 $ 248,200 Job 1 direct labor (700 hours) Job 2 direct labor (550 hours) Job 3 direct labor (300 hours) Indirect labor Total $ 14,800 11,800 6,500 9,700 $ 42,800