Canfield Construction applies overhead to its projects at a rate of $65 per direct labor hour. Laborers are paid an average rate of $30 per hour. The Jefferson Apartments project was charged a total of $1,200,000 in direct materials and $450,000 in direct labor costs.

a. Overhead applied to the Jefferson Apartments project amounted to:

b. The journal entry to transfer the completed Jefferson Apartments project to Canfield's finished goods inventory would include:

c. The journal entry made by Canfield to record the sale of the Jefferson Apartments project to King Development Company for $5,250,000 would include:

(a) $975,000

(b) $2,625,000

(c) $2,625,000

Explanation:

(a) Direct labor hours:

= Direct labor costs ÷ Average rate of labor per hour

= $450,000 ÷ $30 per hour

= 15,000 hours

Overhead applied to the Jefferson Apartments project:

= Direct labor hours × rate per direct labor hour

= 15,000 hours × $65 per direct labor hour

= $975,000

(b) Finished goods inventory:

= Direct materials + Direct labor costs + Overhead applied

= $1,200,000 + $450,000 + $975,000

= $2,625,000

Hence, the finished goods inventory account debited by the amount $2,625,000.

(c) Cost of goods sold is debited by the amount of $2,625,000.

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