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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 Sturdy Construction, Inc. is a home builder in Arizona. Sturdy uses a job order costing system in which each house is a job. Because it constructs houses, the company uses an account titled Construction Overhead. The company applies overhead based on estimated direct labor costs. For the year, it estimated construction overhead of $1,000,000 and total direct labor cost of $2,000,000. The following events occurred during August: (Click the icon to view the events.) Read the requirements. Requirement 1. Calculate Sturdy's predetermined overhead allocation rate for the year. Predetermined overhead allocation rate Requirement 2. Prepare journal entries to record the events in the general journal. (Record debits first, then credits. Exclude explanations from any journal entries.) a. Purchased materials on account, $490,000. Date Accounts Debit Credit b. Requisitioned direct materials and used direct labor in construction. Record the materials requisitioned. Date Accounts Debit Credit b. c. The company incurred total wages of $250,000. Use the data from Item b to assign the wages. (Assume the wages have not been paid.) Date Accounts Debit Credit d. Depreciation of construction equipment, $6,500 Date Accounts Credit e. Other overhead costs incurred: Equipment rentals paid in cash, $30,000; Worker liability insurance expired, $9,000. (Prepare a single journal entry for this event. Date Accounts Credit Debit f. Allocated overhead to jobs. Date Accounts Debit Credit Requirement 3. T-accounts for Work-in-Process Inventory and Finished Goods Inventory have been opened for you. Post the appropriate entries to these accounts, identifying each entry by letter. Determine the ending account balances, assuming that the beginning balances were zero. Click to view the journal entries you prepared above. Work-in-Process Inventory Finished Goods Inventory Requirement 4. Add the costs of the unfinished houses, and show that this total amount equals the ending balance in the Work-in-Process Inventory account Sturdy Construction, Inc. Reconciliation of Work-in-Process Inventory Subsidiary and Control Accounts Total WIP Balance Unfinished houses: Direct Materials Direct Labor Construction Overhead Total cost equals Ending WIP Inventory Requirement 5. Add the costs of the completed house that has not yet been sold, and show that this equals the ending balance in Finished Goods Inventory. Sturdy Construction, Inc. Reconciliation of Finished Goods Inventory Subsidiary and Control Accounts Completed, unsold house: Direct Materials Direct Labor Construction Overhead Total cost equals Ending Finished Goods Inventory Requirement 6. Compute gross profit on the house that was sold. What costs must gross profit cover for Sturdy Construction? Sturdy Construction, Inc. Gross profit on Homes Sold In August Gross profit What costs must gross profit cover for Sturdy Construction? The gross profit must cover these types of costs: truction? Administration Construction wages Customer service Design Direct labor Direct materials Distribution Income taxes Marketing Research and development