Life Fitness ordered and received $90,000 of raw materials during December Life Fitness used $112,000 of direct raw materials during December ($40,000 for Job 603 and $72,000 for Job 604). Life Fitness used $2,000 of indirect raw materials during December. Life Fitness incurred $30,000 of direct labor on jobs. ($10,000, 500 Direct Labor Hour on Job 603; $20,000, 1,000 Direct Labor Hour on Job 604) Life Fitness incurred $13,000 of indirect labor on jobs. Life Fitness incurs other indirect manufacturing costs, such as plant utilities ($3,000), plant depreciation ($4,000), plant insurance ($1,000), and plant property taxes ($2,000), during the period. Assume management estimates total manufacturing overhead costs for the year to be $1 million. Also assume management has selected direct labor hours as the allocation base. Furthermore, management estimates that 62,500 of direct labor hours will be used during the year. Both Job 603 and Job 604 were completed this period. Life Fitness sold 40 cross-trainers from Job 603, at a price of $1,425 each, and all 60 treadmills from Job 604, at a price of $2,500 each. Life Fitness incurred $20,000 in salaries and commissions, $3,300 for office rent, and $9,400 for advertising. Please prepare the income statement by adopting job order costing.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Life Fitness ordered and received $90,000 of raw materials during December
Life Fitness used $112,000 of direct raw materials during December ($40,000 for Job 603 and $72,000 for Job 604).
Life Fitness used $2,000 of indirect raw materials during December.
Life Fitness incurred $30,000 of direct labor on jobs.

($10,000, 500 Direct Labor Hour on Job 603; $20,000, 1,000 Direct Labor Hour on Job 604)

Life Fitness incurred $13,000 of indirect labor on jobs.
Life Fitness incurs other indirect manufacturing costs, such as plant utilities ($3,000), plant depreciation ($4,000), plant insurance ($1,000), and plant property taxes ($2,000), during the period.
Assume management estimates total manufacturing overhead costs for the year to be $1 million. Also assume management has selected direct labor hours as the allocation base. Furthermore, management estimates that 62,500 of direct labor hours will be used during the year.
Both Job 603 and Job 604 were completed this period.
Life Fitness sold 40 cross-trainers from Job 603, at a price of $1,425 each, and all 60 treadmills from Job 604, at a price of $2,500 each.
Life Fitness incurred $20,000 in salaries and commissions, $3,300 for office rent, and $9,400 for advertising.

Please prepare the income statement by adopting job order costing.

III.
Understanding cost - job order costing
Production Schedule
For the Month of December
Scheduled Scheduled
Start Date End Date
Stock or
Job
Model Number
Quantity
Customer
603
X4 Cross-Trainer
For stock
50
12/2
12/6
604
T5 Treadmill
For stock
60
12/7
12/17
Job Cost Record
Job Number: 603
Customer: For stock
Job Description: 50 units of X4 Elliptical Cross-Trainers
Date Started: Dec. 2
Date Completed:
Manufacturing Cost Information:
Cost Summary
Direct Materials
Direct Labor
Manufacturing Overhead
$
Total Job Cost
$
Number of Units
50 units
Cost per Unit
$
Shipping Information:
Date
Quantity Shipped
Units Remaining
Cost Balance
Copyright © 2018, 2015, 2013 by Pearson Education, Inc.
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