Questions: Information on Kwon Manufacturing's activities for its first month of operations follows: a. Purchased 101,600 of raw materials on credit. b. Materials requisitions show the following materials used for the month. Job 201 49,800 Job 202 25,200 Total direct materials 75,000 Indirect materials 10,220 Total materials used 85,220 c. Time tickets show the following labor used for the month. Job 201 40,800 Job 14,200 Total direct labor 55,000 Indirect labor 25,800 80,800 d. Applied overhead to Job 201 and to Job 202 using a predetermined overhead rate of 80% of direct mat cost. e. Transferred Job 201 to Finished Goods Inventory. f. Sold Job 201 for 168,560 on credit. g. Incurred the following actual other overhead costs for the month. Depreciation of factory equipment 33,600 Rent on factory building (payable) 660 Factory utilities (payable) 960 Expired factory insurance 4,600 Total other factory overhead costs 39,820

Information on Kwon Manufacturing's activities for its first month of operations follows: a. Purchased 101,600 of raw materials on credit. b. Materials requisitions show the following materials used for the month. Job 201 49,800 Job 202 25,200 Total direct materials 75,000 Indirect materials 10,220 Total materials used 85,220 c. Time tickets show the following labor used for the month. Job 201 40,800 Job 14,200 Total direct labor 55,000 Indirect labor 25,800 80,800 d. Applied overhead to Job 201 and to Job 202 using a predetermined overhead rate of 80% of direct mat cost. e. Transferred Job 201 to Finished Goods Inventory. f. Sold Job 201 for 168,560 on credit. g. Incurred the following actual other overhead costs for the month. Depreciation of factory equipment 33,600 Rent on factory building (payable) 660 Factory utilities (payable) 960 Expired factory insurance 4,600 Total other factory overhead costs 39,820
Transcript text: Information on Kwon Manufacturing's activities for its first month of operations follows: a. Purchased $\$ 101,600$ of raw materials on credit. b. Materials requisitions show the following materials used for the month. \begin{tabular}{lr} Job 201 & $\$ 49,800$ \\ \cline { 2 - 2 } Job 202 & 25,200 \\ \hline Total direct materials & 75,000 \\ Indirect materials & 10,220 \\ \hline Total materials used & $\$ 85,220$ \\ \hline \end{tabular} c. Time tickets show the following labor used for the month. \begin{tabular}{lr} Job 201 & $\$ 40,800$ \\ Job & 14,200 \\ Total direct labor & 55,000 \\ Indirect labor & 25,800 \\ & $\$ 80,800$ \\ \hline \end{tabular} d. Applied overhead to Job 201 and to Job 202 using a predetermined overhead rate of $80 \%$ of direct mat cost. e. Transferred Job 201 to Finished Goods Inventory. f. Sold Job 201 for $\$ 168,560$ on credit. g. Incurred the following actual other overhead costs for the month. \begin{tabular}{lr} Depreciation of factory equipment & $\$ 33,600$ \\ Rent on factory building (payable) & 660 \\ Factory utilities (payable) & 960 \\ Expired factory insurance & 4,600 \\ \hline Total other factory overhead costs & $\$ 39,820$ \\ \hline \end{tabular}
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Solution

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To compute the gross profit on the sale of Job 201, we need to determine the cost of goods sold (COGS) for Job 201 and then subtract it from the sales revenue.

Step 1: Calculate the Cost of Goods Sold (COGS) for Job 201

Direct Materials for Job 201:

  • Given: \$49,800

Direct Labor for Job 201:

  • Given: \$40,800

Applied Overhead for Job 201:

  • The predetermined overhead rate is 80% of direct materials cost.
  • Applied Overhead = 80% of \$49,800 = 0.80 * \$49,800 = \$39,840

Total Cost for Job 201:

  • Total Cost = Direct Materials + Direct Labor + Applied Overhead
  • Total Cost = \$49,800 + \$40,800 + \$39,840 = \$130,440
Step 2: Calculate Gross Profit

Sales Revenue for Job 201:

  • Given: \$168,560

Gross Profit:

  • Gross Profit = Sales Revenue - COGS
  • Gross Profit = \$168,560 - \$130,440 = \$38,120
Conclusion

The gross profit on the sale of Job 201 is \$38,120.

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