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 64,000 2,860,000 1,740,000 58,000 828,000 2,160,000 $17,660,000 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 $154,000 and direct-labor charges of $85,000. The company charges any under-or overapplied overhead to Cost of Goods Sold.

Answer 1

Finished - Goods inventory, Jan. 1	$0
Add: Cost of goods manufactured	$15,761,800
Cost of goods available for sale	$15,761,800
Less : Finished goods inventory, Dec. 31	$349,500
Unadjusted cost of goods sold	$15,412,300
Less: Over applied overhead	$105,000
Cost of goods sold	$15,307,300

Working notes:

Predetermined overhead rate = manufacturing overhead / Direct labor

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

= 1.3

Cost of goods manufactured = Beginning work-in process + Direct materials + Direct labor + Manufacturing overhead

= $156,800 + $5,600,000 + $4,350,000 + (1.3 * $4,350,000)

= $156,800 + $5,600,000 + $4,350,000 + $5,655,000

= $15,761,800

Ending Finished goods = Direct material + Direct labor + Manufacturing overhead

= $154,000 + $85,000 + ($85,000 * 1.3)

= $154,000 + $85,000 + $110,500

= $349,500

Over applied overhead = (Direct labor * 1.3) - (Indirect Material + Indirect labor + Factory depreciation + Factory Insurance + Factory Utilities)

= ($4,350,000 * 1.3) - ($64,000 + $2,860,000 + $1,740,000 + $58,000 + $828,000)

= $5,655,000 - $5,550,000

= $105,000