ACCOUNTING
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 Materials Used $5,600,000.00
Direct Labor $4,350,000.00
Indirect Material Used $65,000.00
Indirect Labor $2,860,000.00
Factory Depreciation $1,740,000.00
Factory Insurance $59,000.00
Factory Utilities $830,000.00
Selling and Administrative Expenses $2,160,000.00
Total $17,664,000.00
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 overapplied overhead to Cost of Goods Sold.
Directions:
1 Calculate the companies predetermined overhead application rate.
2.Calculate the additions to the work-in-process inventory account for the direct material used, direct labor and manufacturing overhead.
3.Calculate the finished goods inventory for the 12/31/x2 balance sheet.
4.Calculate the over-applied or under applied overhead at year end.
5.Explain if it is appropriate to include the selling and administrative expenses within cost of goods sold.
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