Reference no: EM132870158

Problem 1 - Kennedy Kitchen and Bath (KKB) Company designs and installs upscale kitchens and bathrooms. On May 1, there were three jobs in process, Jobs 77, 78, and 79. During May, two more jobs were started, Jobs 80 and 81. By May 31, Jobs 77, 78, and 80 were completed. The following data were gathered: Overhead is applied at the rate of 150% of direct labor cost. Jobs are sold at cost plus 30%. Operating expenses for May totaled $2,700. Construct an income statement for KKB for the month of May.

Problem 2 - Barok Manufacturing produces machine parts on a job-order basis. Most business is obtained through bidding. Most firms competing with Barok bid full cost plus a 20% markup. Recently, with the expectation of gaining more sales, Barok reduced its markup from 25% to 20%. The company operates two service departments and two producing departments. The budgeted costs and the normal activity levels for each department are given below. The direct costs of Department A are allocated on the basis of employees. The direct costs of Department B are allocated on the basis of maintenance hours. Departmental overhead rates are used to assign costs to products. Department C uses machine hours, and Department D uses labor hours. The firm is preparing to bid on a job (Job K) that requires three machine hours per unit produced in Department C and no time in Department D. The expected prime costs per unit are $67. Allocate the service costs to the producing departments by using the direct method.