Memory Construction, Inc. is a home builder in Arizona. Memory 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 $1,050,000 and total direct labor cost of $2,100,000. The following events occurred during August:

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.

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.

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.

Requirement 6. Compute gross profit on the house that was sold. What costs must gross profit cover for Memory Construction?

- More info a. Purchased materials on account, $430,000 b. Requisitioned direct materials and used direct labor in construction. Recorded the materials requisitioned. Direct Materials Direct Labor House 402 $ 43,000 52,000 $ 69,000 House 403 32,000 House 404 63,000 58,000 House 405 80,000 57,000 c. The company incurred total wages of $270,000. Use the data from Item b to assign the wages. Wages are not yet paid. d. Depreciation of construction equipment, $6,200 e. Other overhead costs incurred: Equipment rentals paid in cash, $37,000; Worker liability insurance expired, $9,000. f. Allocated overhead to jobs. g. Houses completed: 402, 404 h. House sold on account: 404 for $210,000 - Requirements 1. Calculate Memory's predetermined overhead allocation rate for the year. 2. Prepare journal entries to record the events in the general journal. 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. 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. 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. 6. Compute gross profit on the house that was sold. What costs must gross profit cover for Memory Construction? Click to view the journal entries you prepared above. Work-in-Process Inventory Finished Goods Inventory Memory 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 Memory 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 Memory Construction, Inc. Gross profit on Homes Sold In August Gross profit What costs must gross profit cover for Memory Construction? The gross profit must cover these types of costs