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, 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 $ 5,500,000 4,350,000 64,000 2,860,000 1,740,000 58,000 830,000 2,160,000 $ 17,562,000 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.

Can someone help me reach the correct response to this question?

Answer 1

Predetermined overhead rate= Budgeted manufacturing overhead/Budgeted direct labor costs

= $5460000*100/4200000

= 130% of direct labor cost

Applied manufacturing cost= Direct labor*Predetermined overhead rate

= $4350000*130%= $5655000

Cost of goods manufactured= Beginning work in process+Direct materials+Direct labor+Applied manufacturing-Ending work in process

= $156800+5500000+4350000+5655000-0

= $15661800

Actual manufacturing overhead= Indirect materials+Indirect labor+Factory depreciation+Factory insurance+Factory utilities

= $64000+2860000+1740000+58000+830000

= $5552000

Underapplied or overapplied overhead= Applied manufacturing cost-Actual manufacturing overhead=

= $5655000-5552000= $103000 overapplied

Ending finished goods inventory= Direct materials+Direct labor+Applied manufacturing

= $155000+85000+(85000*130%)

= $350500

Finished goods inventory, Jan 1	$0
Add: Cost of goods manufactured	15661800
Cost of goods available for sale	$15661800
Less: Finished goods inventory, ending	350500
Unadjusted cost of goods sold	$15311300
Less: Overapplied overhead	103000
Cost of goods sold	$15208300

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