Question: XYZ Company began operations during 2018 and employs a job-order costing system that applies overhead to jobs using direct labor hours as the activity level. For 2018, XYZ Company had total estimated overhead of $225,000 and total estimated direct labor hours of 18,750.
Listed below is a summary of events and transactions that occurred during 2018:
a. XYZ Company purchased 80,000 pounds of direct materials at $5.00 per pound.
b. XYZ began work on three jobs. Direct materials used for each job were:
Job A-1 .................. 22,000 pounds
Job A-2 .................. 26,000 pounds
Job A-3 .................. 19,000 pounds
c. Direct labor hours used for each job were:
Job A-1 .................. 9,200 hours
Job A-2 .................. 8,500 hours
Job A-3 .................. 7,600 hours
Direct labor workers are paid $15 per hour.
d. The following additional costs were incurred:
Manufacturing Facility Administrative Facility
Rent .................. $ 82,000 $ 15,000
Depreciation ....... 95,000 12,000
Utilities ............. 71,000 10,000
Salaries .............. 92,0001 65,000
Totals ............... $ 340,000 $ 102,000
1 This $92,000 is all indirect labor. See letter (c) for direct labor for the manufacturing facility.
e. Jobs A-1 and A-2 were completed during 2011. 80% of the units from Job A-2 were sold to the customer for $450,000. Calculate the amount of net income reported on XYZ Company's 2018 income statement.