South Bay Manufacturing began business on January 1.During its first year of operation,South Bay worked on five industrial jobs and reported the following information at year-end: $$\begin{array} { | l | r | r | r | r | r | }
\hline & \text { Job 1 } & \text { Job 2 } & \text { Job 3 } & \text { Job 4 } & \text { Job 5 } \
\hline \text { Direct Materials } & 1,500 & 7,900 & 4,000 & 3,500 & 1,500 \
\hline \text { Direct Labor } & 15,000 & 21,500 & 13,000 & 12,000 & 800 \
\hline \text { Allocated Mfg. Overhead } & 1,500 & 7,800 & 2,500 & 7,500 & 200 \
\hline & & & & & \text { Not } \
\text { Job completed: } & \text { Jun 30 } & \text { Sep 1 } & \text { Oct 15 } & \text { Nov 1 } & \text { completed } \
\hline \text { Job sold: } & \text { Jul 10 } & \text { Sep 12 } & \text { Not sold } & \text { Not sold } & \text { N/A } \
\hline \text { Revenues: } & 44,000 & 39,000 & \text { N/A } & \text { N/A } & \text { N/A } \
\hline
\end{array}$$ South Bay's allocation of overhead costs left a debit balance of $1,100 in the Manufacturing Overhead account,which was adjusted to zero at year-end.What was the amount of gross profit earned during the year?

Question

South Bay Manufacturing began business on January 1.During its first year of operation,South Bay worked on five industrial jobs and reported the following information at year-end: $$\begin{array} { | l | r | r | r | r | r | } 
\hline & \text { Job 1 } & \text { Job 2 } & \text { Job 3 } & \text { Job 4 } & \text { Job 5 } \
\hline \text { Direct Materials } & 1,500 & 7,900 & 4,000 & 3,500 & 1,500 \
\hline \text { Direct Labor } & 15,000 & 21,500 & 13,000 & 12,000 & 800 \
\hline \text { Allocated Mfg. Overhead } & 1,500 & 7,800 & 2,500 & 7,500 & 200 \
\hline & & & & & \text { Not } \
\text { Job completed: } & \text { Jun 30 } & \text { Sep 1 } & \text { Oct 15 } & \text { Nov 1 } & \text { completed } \
\hline \text { Job sold: } & \text { Jul 10 } & \text { Sep 12 } & \text { Not sold } & \text { Not sold } & \text { N/A } \
\hline \text { Revenues: } & 44,000 & 39,000 & \text { N/A } & \text { N/A } & \text { N/A } \
\hline
\end{array}$$ South Bay's allocation of overhead costs left a debit balance of $1,100 in the Manufacturing Overhead account,which was adjusted to zero at year-end.What was the amount of gross profit earned during the year?

Quizplus · Accepted Answer

Gross profit is the difference between revenues and the sum of direct materials, direct labor, and manufacturing overhead costs. For the year, South Bay earned revenues of $44,000 + $39,000 = $83,000. Its total costs were $1,500 + $7,900 + $4,000 + $3,500 + $1,500 + $15,000 + $21,500 + $13,000 + $12,000 + $800 + $1,500 + $7,800 + $2,500 + $7,500 + $200 = $83,200. Thus, its gross profit was $83,000 - $83,200 = $26,700.

South Bay Manufacturing Began Business on January 1 South Bay's Allocation of Overhead Costs Left a Debit Balance