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Exercise 18-6A Job-order costing Sertoma Condos Inc.

Exercise 18-6A Job-order costing in a service company
Sertoma Condos Inc. a small company owned by Adam Garner, leases three condos of differing sizes
to customers as vacation facilities. Labor costs for each condo consist of maid service and maintenance
cost. Other direct operating costs consist of interest and depreciation. The direct operating costs
for each condo follow.

Direct Labor Other Direct Operating Costs

Condo 1 $ 7,200 $18,000
Condo 2 9,300 21,000
Condo 3 11,250 28,500
Total $27,750 $67,500

Indirect operating expenses, which amounted to $20,250, are allocated to the condos in proportion
to the amount of other direct operating costs incurred for each.

a. Assuming that the amount of rent revenue from Condo 2 is $48,000, what amount of income did
it earn?
b. Based on the preceding information, will the company show finished goods inventory

Solution Summary

Your tutorial shows a report in Excel for profit for condo 2 and shows the allocation of the indirect costs. Click in the cells to see the computations. The response indicates that the condos are not inventory and why not.