Job-Order Costing
Carr Construction, Inc. is a home builder in Florida. Carr uses a job order costing system. Each house
is a job. Because the company builds 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 $1,300,000 and total direct labor cost of
$3,250,000. The following events occurred during August:
a.)	Purchased materials on account, $450,000.
b.)	Requisitioned direct materials and used direct labor in construction. Recorded
	the materials requisitioned on Job Cost Sheets.
			Direct Materials		Direct Labor
		House 402	$ 51,000		$ 43,000
		House 403	66,000		36,000
		House 404	63,000		57,000
		House 405	83,000		52,000
c.)	The company incurred total wages of $250,000. Use the data from the table above to assign
	the wages. Wages are not yet paid. (HINT: Use Wages Payable.)
d.)	Depreciation of construction equipment, $6,800.
e.)	Other overhead costs incurred: Equipment rentals paid in cash, $34,000; Worker liability
	insurance expired, $8,000.
f.)	Allocated overhead to jobs.
g.)	Houses completed: 402 and 404.
h.)	House sold on account: 404 for $230,000.
REQUIREMENTS:
1.)	Calculate Carr's predetermined overhead allocated rate for the year.
2.)	Prepare journal entries to record the events in the general journal.
3.)	Open T-accounts for Work-in-Process Inventory and Finished Goods Inventory. Post
	the appropriate entries to these accounts. Identify each entry by letter. Determine
	the ending account balances, assuming the beginning balances were zero.
4.)	Add the costs of the unfinished houses. Show that this total amount equals the ending
	balance in the Work-in-Process Inventory account.
5.)	Add the cost of the completed house that has not yet been sold. Show that this amount
	equals the ending balance in Finished Goods Inventory.
6.)	Compute the gross profit on the house that was sold. What costs must gross profit cover
	for Carr Construction?