P3-46 Finlon Upholstery,
Inc. uses a job order costing system to accumulate manufacturing costs. The
company’s work-in-process on December 31, 20x1, consisted of one job (no.
2077), which was carried on the year-end balance sheet at $156,800. There was
no finished-goods inventory on this date.
Finlon applies manufacturing
overhead to production on the basis of direct-labor cost. (The budgeted
direct-labor cost is the company’s practical capacity, in terms of direct-labor
hours, multiplied by the budgeted direct labor rate.) Budgeted totals for 20x2
for direct labor and manufacturing overhead are $4,200,000 and $5,460,000,
respectively. Actual results for the year follow.
Direct material used
.......................................................................................
$5,600,000
Direct labor
......................................................................................................
4,350,000
Indirect material used
.......................................................................................
65,000
Indirect labor
...................................................................................................
2,860,000
Factory depreciation
.........................................................................................
1,740,000
Factory insurance
............................................................................................
59,000
Factory utilities
................................................................................................
830,000
Selling and administrative
expenses ...............................................................
2,160,000
Total
............................................................................................................
$17,664,000
Job no. 2077 was completed in
January 20x2; there was no work in process at year-end. All jobs produced
during 20x2 were sold with the exception of job no. 2143, which contained
direct-material costs of $156,000 and direct-labor charges of $85,000. The
company charges any under- or over applied overhead to Cost of Goods Sold.
Required:
1. Determine the company’s
predetermined overhead application rate.
2. Determine the
additions to the Work-in-Process Inventory account for direct material used,
direct labor, and manufacturing overhead.
3. Compute the amount
that the company would disclose as finished-goods inventory on the December 31,
20x2, balance sheet.
4. Prepare the journal
entry needed to record the year’s completed production.
5. Compute the amount of
under- or over applied overhead at year-end, and prepare the necessary journal
entry to record its disposition.
6. Determine the
company’s 20x2 cost of goods sold.
7. Would it be
appropriate to include selling and administrative expenses in either
manufacturing overhead or cost of goods sold? Briefly explain
TUTORIAL PREVIEW
1 Predetermined overhead rate = budgeted overhead ÷
budgeted direct-labor cost
|
Budgeted
overhead
|
5,460,000
|
|
Budgeted
direct labor cost
|
4,200,000
|
|
Predetermined
overhead rate =
|
130%
|
File
name: P3-46 Finlon Upholstery Inc.xlsx File type: xlsx PRICE:$12
