Quaint Construction Inc. is a home builder in Arizona. Quaint 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" to keep track of all overhead costs that will be allocated to each home at the time the homes are completed. The company applies overhead based on estimated direct labor costs. For the year, it estimated construction overhead of $1,100,000 and total direct labor cost of $2,750,000
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The following events occurred during August. a. Materials were purchased on account $400,000. (Update the T amount) [3. During the month, the company requisitioned direct materials for construction for the following houses: {update the job cost sheets attached, Construction in Process and Material T Accounts) Smith House Miles House Jones House Curtis House .Iob M02 Job #403 Job #504 Job #405 total DM: $54,000 $63,000 $13,000 $85,000 $220,000 DL: $42,000 $35,000 $50,000 $53,000 $100,000 c. The company incurred $193,000 total wages: $180,000 direct labor above and $13,000 indirect labor (part of Construction Overhead) Update the T accounts and the job cost sheets. d. Additional Construction overhead costs were: $59,200 for depreciation of construction equipment, indirect labor, construction equipment rentals and worker liability insurance, all on account. Update the Construction in Process and Accounts PavableT accounts. Instructions: (Pl-24.53 loe. end\" 61?\":ch {'83: bfe') 1. Show calculations for the Predetermined overhead rate that was used to allocate the Construction Overhead costs to the houses when completed: 2. Complete thejob cost sheets for the 4 houses and the T-accounts on the back of this sheet. Assume that houses #402, #403 and #404 are completed. [The Work In process account shows $57,000 because job #404 was started last month and was not yet completed} Allocate the Construction Overhead Costs to those jobs now that they are completed. Be sure to update the Construction Overhead and the Work in Process T-accounts as well as the job cost sheets. 3. House #404 was sold for $250,000 cash. 4. What is the ending balance in the Work in Progress account? ' what job name and it does that number match? 5. What is the ending balance in the construction overhead Taccount after finishing jobs 402, 403 and 404? 6. What is the balance in the Finished Goods T~ account? - what job numbers does that match? 7. Compute the gross prot on the house that was sold: What costs must gross profit cover for Quaint Construction in order to earn a net prot? Materials Construction Overhead Work in Process Finished Goods S5100] Cost of Goods Sold Cash I Accounts Receivable $25,000 Accounts Pa able Payroll Payable Sales Job Cost Sheets Smith House #402 110 Main Street, Dittmer, MO DM DL Constr. OH Applied Total cost of Job Job Cost Sheets Jones House #404 114 Main Street, Dittmer, MO DM 550,000+ DI. $7,000 + Constr. O/H Applied __._ Total cost of job Answer the following questions: Miles House #403 112 Main Street, Dittmer, MO Curtis House #405 115 Main Street, Dittmer, MO 1. Why is the job order costing system better than the process costing system for this company? 2. Why does the company use a predetermined application rate for the construction overhead costs
