Bob's Powerwasher Company
Bob's Powerwasher Company makes custom powerwashers for individual customers. On April 1, one job was in process, Job 900, which had a cost of $45,650. Jobs 901, 902, and 903 were started during the month of July. Data on costs added during the month are as follows: $\begin{array}{lllll}&\text { Job } 900&\text { Job } 901&\text { Job } 902&\text { Job } 903\
\text { Direct Materials } & \overline{\$ 12,500} & \$ 6,740 & \$ 2,520 & \$ 7,870 \
\text { Direct Labour } & \$ 5,880 & \$ 10,280 & \$ 3,760 & \$ 11,360
\end{array}$ Overhead is applied to production at the rate of 85% of direct labour cost. Job 903 was completed on April 26, and the client was billed at cost plus 45%. All other jobs remained in process.
-Refer to Bob's Powerwasher Company. Suppose selling and administrative expenses for the month of July equal $6,000. What is operating income for the month of July?

Question

Quizplus · Accepted Answer

The operating income is calculated by subtracting the cost of goods sold and selling and administrative expenses from the revenue. For Job 903, the cost is the sum of direct materials, direct labor, and overhead (85% of direct labor). The revenue is cost plus 45%. Subtract the cost and $6,000 expenses from the revenue to get the operating income.

Bob's Powerwasher Company Bob's Powerwasher Company Makes Custom Powerwashers for Individual

Bob's Powerwasher Company
Bob's Powerwasher Company Makes Custom Powerwashers for Individual