Sara Constructs a Small Storage Shed for Resale to Customers

Essay

Sara constructs a small storage shed for resale to customers and incurs the following costs:
$\begin{array}{ll}\$ 3,000 & \text { Direct labor } \\1,500 & \text { Direct materials } \\700 & \text { Other direct costs } \\300 & \text { Allocated indirect costs }\end{array}$

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?