unting for transactions, construction company ruction, Inc. is a home builder in
ID: 2334470 • Letter: U
Question
unting for transactions, construction company ruction, Inc. is a home builder in Arizona. Sunset uses a job order costing each house is a job. Because it constructs houses, the company uses ed Construction Overhead. The company applies overhead based stem r riled Construction on estimated di $1,250 during August: account titled Co n airect labor costs. For the year, it estimated construction overhead of d total direct labor cost of $2,500,000. The following events occurred an Purchased materials on account, $440,000. uisitioned direct materials and used direct labor in construction. Recorded the materials requisitioned b. Req Direct Materials Direct Labor House 402 House 403 House 404 House 405 $ 56,000 65,000 62,000 84,000 $41,000 35,000 57,000 55,000 . The company incurred total wages of $210,000. Use the data from Item b to assign the wages. Wages are not yet paid d. D epreciation of construction equipment, $6,800. c. Other overhead costs incurred: Equipment rentals paid in cash, $34.000; Worker liability insurance expired, $6,00. f Allocated overhead to jobs. ouses completed: 40L h. House sold on account: 404 for $220,000.Explanation / Answer
1.) Calculate Sunset's predetermined overhead allocated rate for the year. Predetermined Overhead Allocated Rate = Estimated overhead cost/Estimated direct labor costs Predetermined Overhead Allocated Rate = $1,250,000/$2,500,000 50.00% of Direct labour cost. 2) Journal Entry Accounts and Explanation Debit Credit a) Raw Materials Inventory $440,000 Accounts Payable $440,000 b) Direct Materials Work-in-Process Inventory $267,000 House 402 $56,000 Raw Materials Inventory $267,000 House 403 65000 House 404 62000 House 405 84000 $267,000 c) Work-in-Process Inventory $188,000 Direct Labor Construction Overhead $22,000 House 402 $41,000.00 Wages Payable $210,000 House 403 $35,000.00 House 404 $57,000.00 House 405 $55,000.00 $188,000 d) Construction Overhead $6,800 Accumulated Depreciation––Equipment $6,800 e) Construction Overhead $40,000 Cash $34,000 Prepaid Insurance $6,000 f) Work-in-Process Inventory ($188,000 x 50%) $94,000 Construction Overhead $94,000 g) Finished Goods Inventory $265,000 Work-in-Process Inventory $265,000 House 402: $56,000 + $41,000 + ($41,000 × 0.50) $117,500 House 404: $62,000 + $57,000 + ($57,000 × 0.50) $147,500 Total $265,000 h) Accounts Receivable $220,000 Sales Revenue $220,000 Cost of Goods Sold $147,500 Finished Goods Inventory $147,500 House 404 sold
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