CompuFurn, Inc. manufactures furniture for computer workstations. CompuFurn uses

Question

CompuFurn, Inc. manufactures furniture for computer workstations. CompuFurn uses a job-order costing system and employs absorption costing. ComuFurn’s work-in-process inventory on November 30 consisted of the following jobs:

On November 30, the company’s finished-goods inventory, which is evaluated using the first-in, first-out (FIFO) method, consisted of four items:

Computer Caddy

At the end of November, the balance in CompuFurn’s Materials Inventory account, which includes both raw materials and purchased parts, was $668,000. Additions to and requisitions from the materials inventory during the month of December included the following:

CompuFurn applies manufacturing overhead on the basis of machine hours. The company’s manufacturing overhead budget for the year totaled $4,500,000. The company planned to use 900,000 machine hours during this period, which is the firm’s estimated practical capacity. Through the first 11 months of the year, a total of 830,000 machine hours were used, and actual manufacturing overhead amounted to $4,140,000.

During the month of December, machine hours and labor hours consisted of the following:

The jobs completed in December and the unit sales for that month are as follows:

REQUIRED:

1. Describe when it is appropriate for a company to use a job-order costing system.

2. Calculate the balance in CompuFurn, Inc.’s Work-in-Process Inventory account as of December 31.

3. Calculate the cost of the chairs in CompuFurn, Inc.’s finished-goods Inventory as of December 31.

4. Actual manufacturing overhead incurred in December amounted to $252,000. Calculate CompuFurn’s overapplied or underapplied overhead for the year.

5. Explain two alternative accounting treatments for overapplied or underapplied overhead balances when using a job-order costing system.

JOB NUMBER DESCRIPTION UNIT ACCUMULATED COSTS CC723 Computer Caddy 20,000 $900,000 CH291 Chair 15,000 $431,000 PS812 Printer Stand 25,000 $250,000 Total $1,581,000

Explanation / Answer

1 Job order costing system is appropriate for a company that produce a number of different products or manufacturing customized products 2 Work in process account consist of jobs which have not completed In this case,Job PS812 has not completed Pre-determined overhead rate=Budgeted manufacturing overhead/Budgeted machine hours=4500000/900000=$5 per hour Cost of PS812 Accumulated cost 250000 Raw materials 124000 Purchased parts 87000 Labor cost 200500 Manufacturing overhead (Machine hours*Predetermined overhead rate) (19500*5) 97500 Balance in WIP 759000 ` 3 Cost of jobs transferred to finshed goods CC723 CH291 DS444 Accumulated cost 900000 431000 0 Raw materials 51000 3000 65000 Purchased parts 104000 10800 187000 Labor cost 122400 43200 138000 Manufacturing overhead (Machine hours*Predetermined 60000 22000 70000 overhead rate) (12000*5) (4400*5) (14000*5) (19500*5) Total cost 1237400 510000 460000 Units 20000 15000 5000 Cost per unit 61.87 34 92 Company follows fifo method Sold Balance Item shipped Qty Rate Amount Qty Rate Amount Computer caddy 17500 7500 64 480000 10000 61.87 618700 10000 61.87 618700 Chair 21000 19400 35 679000 1600 34 54400 13400 34 455600 Desks 6000 6000 102 612000 5200 102 530400 5000 92 460000 990400 Printer stand 18000 18000 55 990000 3000 55 165000 Finished goods inventory balance 2229700 4 Actual manufaturing overhead=252000 Applied manufacturing overhead=Total machine hours*pre-determined overhead rate=49900*5=249500 Applied manufacturing overhead is less than actual manufacturing overhead Hence,Under applied overhead=252000-249500=2500 5 1. Transfer to cost of goods sold account 2. Allocate among work in process,finished goods and cost of goods sold on suitable basis

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.