Question

The Searider Company uses a job-order costing system. The following transactions occurred in April: a. Raw materials were purchased on account, $180,000. b. Raw materials used in production, $148,000 ($130,000 direct materials and $18,000 indirect materials). c. Accrued direct labor cost of $75,000 and indirect labor cost of $105,000. d. Depreciation recorded on factory equipment, $40,000. e. Other manufacturing overhead costs accrued during April, $118,000. f. The company applies manufacturing overhead cost to production using a predetermined overhead rate of $6 per machine-hours. A total of 46,000 machine-hours were used in April. g. Jobs costing $495,000 according to their job cost sheets were completed during April and transferred to Finished Goods. h. Jobs that had cost $450,000 to complete according to their job cost sheets were shipped to customers during the month. These jobs were sold on account at 30% above cost. Required: 1. Prepare journal entries to record the transactions given above. 2. Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant transactions from above to each account. Compute the ending balance in each account, assuming that Work in Process has a beginning balance of $39,000.

Answer 1

The firm's accounting profit is calculated by subtracting the total expenses from the sales revenue. With a sales revenue of $1 million and total expenses of $950,000, the firm's accounting profit was $50,000.

Step-by-step explanation:

To calculate the firm's accounting profit, we subtract the total expenses from the sales revenue. The expenses include costs for labor, capital, and materials.

Here's the calculation:

• Sales Revenue: $1,000,000
• Cost of Labor: $600,000
• Cost of Capital: $150,000
• Cost of Materials: $200,000

The sum of all expenses is $600,000 (labor) + $150,000 (capital) + $200,000 (materials) = $950,000. Therefore, the accounting profit is:

Sales Revenue - Total Expenses = Profit

$1,000,000 - $950,000 = $50,000

The firm's accounting profit for the year was $50,000.