Sherborn Construction, Inc. is a home builder in Arizona. Sherborn 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 $1,350,000 and total direct labor cost of $2,700,000. The following events occurred during August: (Click the icon to view the events.) Read the requirements. Requirement 1. Calculate Sherborn's predetermined overhead allocation rate for the year. House 402 House 403 House 404 House 405 a. Purchased materials on account, $480,000 b. Requisitioned direct materials and used direct labor in construction. Recorded the materials requisitioned. Direct Materials Direct Labor $ 57,000 $ 67,000 66,000 87,000 = 49,000 37,000 55,000 53,000 Predetermined overhead allocation rate g. Houses completed: 402, 404 h. House sold on account: 404 for $230,000 c. The company incurred total wages of $300,000. Use the data from Item b to assign the wages. Wages are not yet paid. d. Depreciation of construction equipment, $6,400 e. Other overhead costs incurred: Equipment rentals paid in cash, $32,000; Worker liability insurance expired, $4,000. f. Allocated overhead to jobs.
Sherborn Construction, Inc. is a home builder in Arizona. Sherborn 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 $1,350,000 and total direct labor cost of $2,700,000. The following events occurred during August: (Click the icon to view the events.) Read the requirements. Requirement 1. Calculate Sherborn's predetermined overhead allocation rate for the year. House 402 House 403 House 404 House 405 a. Purchased materials on account, $480,000 b. Requisitioned direct materials and used direct labor in construction. Recorded the materials requisitioned. Direct Materials Direct Labor $ 57,000 $ 67,000 66,000 87,000 = 49,000 37,000 55,000 53,000 Predetermined overhead allocation rate g. Houses completed: 402, 404 h. House sold on account: 404 for $230,000 c. The company incurred total wages of $300,000. Use the data from Item b to assign the wages. Wages are not yet paid. d. Depreciation of construction equipment, $6,400 e. Other overhead costs incurred: Equipment rentals paid in cash, $32,000; Worker liability insurance expired, $4,000. f. Allocated overhead to jobs.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Transcribed Image Text:Requirements
1. Calculate Sherborn'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.
1
Transcribed Image Text:Sherborn Construction, Inc. is a home builder in Arizona. Sherborn uses a job order costing system in which each
house is a job. Because 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
$1,350,000 and total direct labor cost of $2,700,000. The following events occurred during August:
i (Click the icon to view the events.)
Read the requirements.
Requirement 1. Calculate Sherborn's predetermined overhead allocation rate for the year.
House 402
House 403
House 404
House 405
+
a. Purchased materials on account, $480,000
b. Requisitioned direct materials and used direct labor in construction. Recorded the materials requisitioned.
Direct Materials Direct Labor
$
57,000 $
67,000
66,000
87,000
Predetermined overhead
allocation rate
49,000
37,000
55,000
53,000
c. The company incurred total wages of $300,000. Use the data from Item b to assign the wages. Wages are not yet paid.
d. Depreciation of construction equipment, $6,400
e. Other overhead costs incurred: Equipment rentals paid cash, $32,000; Worker liability insurance expired, $4,000.
f. Allocated overhead to jobs.
g. Houses completed: 402, 404
h. House sold on account: 404 for $230,000
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