XYZ Company began operations during 2011 and employs a job-order costing system that applies overhead to jobs using direct labor hours as the activity level. For 2011, XYZ Company had total estimated overhead of $229,500 and total estimated direct labor hours of 25,500.
Listed below is a summary of events and transactions that occurred during 2011:
a. XYZ Company purchased 80,000 pounds of direct materials at $4.20 per pound.
b. XYZ began work on three jobs. Direct materials used for each job were:
Job A-1 .................. 18,000 pounds
Job A-2 .................. 25,000 pounds
Job A-3 .................. 30,000 pounds
c. Direct labor hours used for each job were:
Job A-1 .................. 9,800 hours
Job A-2 .................. 7,800 hours
Job A-3 .................. 8,400 hours
Direct labor workers are paid $12 per hour.
d. The following additional costs were incurred:
Manufacturing Facility Administrative Facility
Rent ……………... $ 42,000 $ 15,000
Depreciation ……. 45,000 12,000
Utilities …………. 51,000 10,000
Salaries ………..… 92,0001 65,000
Totals …………... $ 230,000 $ 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-3 were completed during 2011. Job A-3 was sold to the customer for $430,000.
Calculate the amount of net income reported on XYZ Company's 2011 income statement.