PLEASE SHOW CALCULATIONS! Thank you! Vernon Corporation builds sailboats. On Jan
ID: 2467980 • Letter: P
Question
PLEASE SHOW CALCULATIONS! Thank you!
Vernon Corporation builds sailboats. On January 1, 2015, the company had the following account balances: $70,000 for both cash and common stock. Boat 25 was started on February 10 and finished on May 31. To build the boat, Vernon had incurred cash costs of $5,800 for labor and $5,550 for materials. During the same period, Vernon paid $7,490 cash for actual manufacturing overhead costs. The company expects to incur $169,000 of indirect overhead cost during 2015. The overhead is allocated to jobs based on direct labor cost. The expected total labor cost for the year is $130,000. Vernon uses a just-in-time inventory management system. Consequently, it does not have raw materials inventory. Raw materials purchases are recorded directly in the Work in Process Inventory account.
Required: a. Use the horizontal financial statements model, to record Vernon’s business events. The first row shows beginning balances. (Enter any decreases to account balances with a minus sign. Do not round intermediate calculations and round final answers to the nearest whole dollar amount.)
b. If Vernon desires to earn a profit equal to 20 percent of cost, for what price should it sell the boat? (Do not round intermediate calculations.)
c. If the boat is not sold by year-end, what amount would appear in the Work in Process Inventory and Finished Goods Inventory on the balance sheet for Boat 25? (Do not round intermediate calculations and round final answers to the nearest whole dollar amount.)
cash + WIP + Finished Goods + Manu. OH = C.S. + Ret Earn. Revenue - Expenses = Net Income + + + + + + + +Explanation / Answer
Cash
WIP
Finished goods
MOH
Common
stock
RE
Revenue
Expense
Net income
70,000
70,000
-5,800
5,800
-5,550
5,550
-7490
7,490
7215*
-7,215
18,565
18,565
51,160
0
18,565
275
70,000
Overhead rate = 169,000/ 130,000 = 130% of direct labor cost
Therefore manufacturing overhead applied= 5550@130% = 7215
(2)Selling price = 18,565 @120% = $22,278
If under applied manufacturing overhead is applied to cost of goods sold then the cost of goods sold will be 18,565 + 275 = $18,840
In that case Selling price will be 18,840 @120% = $22,608
(c)
WIP inventory
18,565
Finished goods
$0
Cash
WIP
Finished goods
MOH
Common
stock
RE
Revenue
Expense
Net income
70,000
70,000
-5,800
5,800
-5,550
5,550
-7490
7,490
7215*
-7,215
18,565
18,565
51,160
0
18,565
275
70,000
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.