Custom Construction is a home builder in Arizona. Custom Construction 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 total construction overhead of $

$1$

$,$

$0$

$5$

$0$

$,$

$0$

$0$

$0$

$$and total direct labor costs of $

$3$

$,$

$5$

$0$

$0$

$,$

$0$

$0$

$0$

$.$

$$The following events occurred during August:

a

$.$

$$Purchased materials on account, $

$4$

$6$

$0$

$,$

$0$

$0$

$0$

$.$

b

$.$

$$Requisitioned direct materials and used direct labor in construction. Recorded the materials requisitioned.

Job Direct Materials Direct Labor

House

$4$

$0$

$2$

$$ $

$5$

$0$

$,$

$0$

$0$

$0$

$$ $

$4$

$5$

$,$

$0$

$0$

$0$

House

$4$

$0$

$3$

$6$

$9$

$,$

$0$

$0$

$0$

$3$

$0$

$,$

$0$

$0$

$0$

House

$4$

$0$

$4$

$6$

$6$

$,$

$0$

$0$

$0$

$5$

$6$

$,$

$0$

$0$

$0$

House

$4$

$0$

$5$

$8$

$8$

$,$

$0$

$0$

$0$

$5$

$5$

$,$

$0$

$0$

$0$

c

$.$

$$The company incurred total wages of $

$2$

$1$

$0$

$,$

$0$

$0$

$0$

$.$

$$Use the data from Item b to assign the wages. Wages are not yet paid.

d

$.$

$$Depreciation of construction equipment, $

$6$

$,$

$0$

$0$

$0$

$.$

e

$.$

$$Other overhead costs incurred: Equipment rentals paid in cash, $

$3$

$6$

$,$

$0$

$0$

$0$

; Worker liability insurance expired, $

$8$

$,$

$0$

$0$

$0$

$.$

f

$.$

$$Allocated overhead to jobs.

g

$.$

$$Houses completed:

$4$

$0$

$2$

$$and

$4$

$0$

$4$

$.$

h

$.$

$$House sold on account:

$4$

$0$

$4$

$$for $

$2$

$0$

$0$

$,$

$0$

$0$

$0$

$.$

$1$

$.$

$$Write the formula used to calculate the company

$$

s construction

$($

manufacturing

$)$

$$overhead rate and calculate Custom Construction

$$

s predetermined overhead allocation rate for the year. You must show supporting computations.

$2$

$.$

$$Prepare journal entries to record the events in the general journal in

$$

good form

$$

$$using the general journal form on the next pages. Since specific dates have not been provided, please use the letters above in the date column for each journal entry.

Date Title and Explanation Ref Debit Credit

$3$

$.$

$$Using the T

$-$

accounts provided below, post the appropriate entries to these accounts, again, identifying each entry by letter. Determine the ending account balances, assuming the beginning balance was zero. Post entries for T accounts for Raw Materials Inventory, Work

$-$

In

$-$

process inventory, finished goods inventory, cost of goods sold, and construction overhead.

$4$

$.$

$$ Analysis. Answer the following questions.

a

$.$

$$What is the amount of gross profit on the house sold and the gross profit percent? Show computations to receive full credit.

b

$.$

$$Is the construction overhead at the end of the period over

$-$

$$or under

$-$

$$applied$.$ Compute this amount. Show computations to receive full credit,