Finlon Upholstery Inc. uses a job-order costing system to accumulate manufacturing costs. The company's work-in-process on December 31, 2001, 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 2002 for direct labor and manufacturing overhead are $4,200,000 and $5,460,000, respectively. Actual results for the year are as follows:
Actual Results | |
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 2002, and there was no work in process at year-end. All jobs produced during 2002 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 the cost of goods sold category.
Using the above information, do the following:
Calculate the company’s predetermined overhead application rate.
Calculate the additions to the work-in-process inventory account for the direct material used, direct labor, and manufacturing overhead.
Calculate the finished-goods inventory for the 12/31/02 balance sheet.
Calculate the over-applied or under-applied overhead at year-end.
Explain if it is appropriate to include selling and administrative expenses in the cost of goods sold category.
Calculate the company’s predetermined overhead application rate.
Solution-
Company predetermined overhead application rate = Budgeted Manufacturing overhead / Budgeted Direct labor cost
Company’s predetermined overhead application rate = $5,460,000 / 4,200,000
Company’s predetermined overhead application rate = 130%
Calculate the additions to the work-in-process inventory account for the direct material used, direct labor, and manufacturing overhead.
Solution-
Addition to work-in process during the period |
||
Costs Addition during the period: |
||
Direct Material |
$5,600,000 |
|
Direct Labor |
$4,350,000 |
|
Manufacturing Overhead |
$5,655,000 |
|
Total cost added |
$15,605,000 |
Calculate the finished-goods inventory for the 12/31/02 balance sheet.
Solution-
Finished goods - Ending Inventory |
||
Direct Material |
$156,000 |
|
Direct Labor |
$85,000 |
|
Manufacturing Overhead |
$110,500 |
|
Total cost of Ending Inventory |
$351,500 |
Calculate the over-applied or under-applied overhead at year-end
Solution-
Finlon Upholstery Inc |
||
Manufacturing Overhead incurred |
||
Indirect Material |
$65,000 |
|
Indirect Labor |
$2,860,000 |
|
Factory Depreciation |
$1,740,000 |
|
Factory Insurance |
$59,000 |
|
Factory Utilities |
$830,000 |
|
Total Cost incurred |
$5,554,000 |
|
Less: Manufacturing Overhead Applied |
$5,655,000 |
|
Overhead Over Applied |
$101,000 |
Explain if it is appropriate to include selling and administrative expenses in the cost of goods sold category.
Solution-
Cost of goods sold means the cost of goods manufactured, i.e cost incurred for bringing it to finished goods inventory. Selling and administrative expenses are incurred to sell the product, after it is ready to sell. Hence Selling and administrative expenses are not included in cost of goods sold.
Finlon Upholstery Inc. uses a job-order costing system to accumulate manufacturing costs. The company's work-in-process on...
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...
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...
Required information [The following information applies to the questions displayed below.) 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...
Required information [The following information applies to the questions displayed below.) 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...
Can someone help me reach the correct response to this question? 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,...
Can someone help me determine how to complete this journal entry? 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...
Required information [The following information applies to the questions displayed below.) 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...
Required information [The following information applies to the questions displayed below.) 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...
Required information [The following information applies to the questions displayed below.) 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...
Required information [The following information applies to the questions displayed below.) 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...