Question

More Info a. Purchased materials on account, $490,000 b. Requisitioned direct materials and used direct labor in construction Recorded the materials requisitioned. Direct Materials Direct Labor House 402 $ 51,000 $ 43,000 House 403 69,000 39,000 House 404 61,000 56,000 House 405 85,000 54,000 c. The company incurred total wages of $250,000. Use the data from Item b to assign the wages. Wages are not yet paid. d. Depreciation of construction equipment, $6,500 e. Other overhead costs incurred: Equipment rentals paid in cash, $30,000; Worker liability insurance expired, $9,000 f. Allocated overhead to jobs. g. Houses completed: 402, 404 h. House sold on account 404 for $260,000 Print Done

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Please make sure to provide answers to fulfill the boxes above.

Answer 1

Part 1

Total estimated overhead costs	/	Total estimated quantity of the overhead allocation base	=	Predetermined overhead allocation rate
1000000	/	2000000	=	50%

Part 2

Date	Accounts	Debit	Credit
a	Raw Materials Inventory	490000
	Accounts Payable		490000
b	Work-in-Process Inventory (51000+69000+61000+85000)	266000
	Raw Materials Inventory		266000
c	Work-in-Process Inventory (43000+39000+56000+54000)	192000
	Construction Overhead (250000-192000)	58000
	Wages Payable		250000
d	Construction Overhead	6500
	Accumulation Depreciation—Equipment		6500
e	Construction Overhead	39000
	Cash		30000
	Prepaid Insurance		9000
f	Work-in-Process Inventory	96000
	Construction Overhead (192000*50%)		96000
g	Finished Goods Inventory (51000+43000+(43000*50%))+(61000+56000+(56000*50%))	260500
	Work-in-Process Inventory		260500
h	Accounts Receivable	260000
	Sales Revenue		260000
	Cost of Goods Sold (61000+56000+(56000*50%))	145000
	Finished Goods Inventory		145000

Part 3

Work-In process inventory b DM 266000 260500 g COGM c DL 192000 f OH 96000 Bal. 293500

Finished Goods inventory g COGM 260500 145000 h COGS Bal. 115500

Part 4

Sturdy Construction Inc Reconciliation of work-in-progress inventory subsidiary And control accounts
	House #403	House #405	Total WIP balance
Unfinished houses:
Direct materials	69000	39000
Direct labor	85000	54000
Construction overhead	42500	27000
Total cost equals Ending WIP Inventory	196500	120000	316500

Part 5

Sturdy Construction Inc Reconciliation of Finished Goods inventory subsidiary And control accounts
	House #402
Unfinished houses:
Direct materials	51000
Direct labor	43000
Construction overhead (50% of direct labor)	21500
Total cost equals Ending WIP Inventory	115500

Part 6

STURDY CONSTRUCTION, INC. Gross Profit on Homes Sold in August
	House #404
Sales revenue	260000
Cost of goods sold	145000
Gross profit	115000

The gross profit must cover these types of costs:

• Administration
• Customer service
• Design
• Distribution
• Income taxes
• Marketing
• Research and development