Problem 2

Vanity Company builds custom-made bathtubs and uses a job order costing system in which each bathtub is a job. The company also uses an account Construction Overhead to record overhead costs and applies overhead based on estimated direct labor costs. For the year, the company estimated construction overhead of $950,000 and total labor costs at $1,900,000. The following events occurred during August:

1. Purchase materials on account, $900,000.
2. Requisitioned direct materials and used direct labor in construction. Recorded the materials requisitioned.