MBA 620 Week 1 Homework.docx

# 7 calculating the cost of jobs making journal entries

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7. Calculating the Cost of Jobs, Making Journal Entries, and Preparing an Income Statement. Classic Boats, Inc., produces custom wood boats. Each boat is built to customer specifications. During April, its first month of operations, Classic Boats began production of a customer order. This order used \$38,800 in direct materials and \$7,400 in direct labor. Classic Boats applies overhead using a predetermined rate of \$1.60 per direct labor dollar. The customer order was delivered and billed at \$70,000. (2.5) a. Calculate the production cost incurred in April for this custom order. \$58,040 b. How much gross profit did Classic Boats earn from this custom order? \$11,960 c. Assume selling costs totaled \$2,000 and general and administrative costs totaled \$5,500. Prepare an income statement for Classic Boats for the month of April. (Assume there is no adjustment to cost of goods sold for underapplied or overapplied overhead.)

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