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Sara Constructs a Small Storage Shed for Resale to Customers

question 4

Essay

Sara constructs a small storage shed for resale to customers and incurs the following costs:
$3,000 Direct labor 1,500 Direct materials 700 Other direct costs 300 Allocated indirect costs \begin{aligned}\$ 3,000 & \text { Direct labor } \\1,500 & \text { Direct materials } \\700 & \text { Other direct costs } \\300 & \text { Allocated indirect costs }\end{aligned}
a.What is Sara's basis in this storage shed?
b.Sara normally sells the storage sheds for $7,000 each.John,one of the workers who builds the storage sheds,buys one for $5,000.What is John's basis in his storage shed?


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