Question

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 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 Direct labor Indirect material used Indirect labor Factory depreciation Factory insurance Factory utilities Selling and administrative expenses Total $ 5,600,000 4,350,000 65,000 2,860,000 1,740,000 58,000 832,000 2,160,000 $17,665,000 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 $155,000 and direct-labor charges of $85,000. The company charges any under-or overapplied overhead to Cost of Goods Sold.

Answer 1

5-a.

Estimated direct labor cost = $4,200,000

Estimated manufacturing overhead = $5,460,000

Predetermined overhead rate = Estimated manufacturing overhead/Estimated direct labor cost

= 5,460,000/4,200,000

= 130% of direct labor cost

Applied manufacturing overhead = Actual direct labor cost x Predetermined overhead rate

= 4,350,000 x 130%

= $5,655,000

Actual manufacturing overhead = 65,000+2,860,000+1,740,000+58,000+832,000

= 5,555,000

Over applied manufacturing overhead = Applied manufacturing overhead - Actual manufacturing overhead

= 5,655,000-5,555,000

= $100,000

Overapplied Overhead

$100,000

5-b.

No	Transaction	General Journal	Debit	Credit
		Manufacturing overhead	$100,000
		Cost of goods sold		$100,000
		( To record disposition of overhead manufacturing overhead)

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