Interpreting Information from a Job-Order Costing System
CompuFurn. Inc. manufactures furniture for computer work stations. CompuFurn uses a job-order costing system and employs absorption costing. Comufurn's work-in-process inventory on November 30 consisted of the following jobs.
Job No. | Description | Units | Accumulated Cost |
CC723 | Computer caddy | 20,000 | $ 900,000 |
CH291 | Chair | 15,000 | 431,000 |
PS812 | Printer stand | 25,000 | 250,000 |
Total | $1,581,000 | ||
On November 30, the company's finished-goods inventory, which is evaluated using the first-in, first-out (FIFO) method, consisted of four items.
Item | Quantity and Unit Cost | Accumulated Cost |
Computer caddy | 7,500 units @ $64 each | $ 480,000 |
Chair | 19,400 units @ $35 each | 679,000 |
Printer stand | 21,000 units @ $55 each | 1,155,000 |
Desk | 11,200 units @ $102 each | 1,142,400 |
Total |
| $3,456,400 |
At the end of November, the balance in CompuFurn's Materials Inventory account, which includes both raw materials and purchased parts, was $668,000. Additions to and requisitions from the materials inventory during the month of December included the following.
Additions | Raw Materials | Purchased Parts |
Additions | $242,000 | $396,000 |
Requisitions: |
|
|
Job CC723 | 51,000 | 104,000 |
Job CH291 | 3,000 | 10,800 |
Job PS812 | 124,000 | 87,000 |
Job DS444 (5,000 desks) | 65,000 | 187,000 |
CompuFurn applies manufacturing overhead on the basis of machine hours. The company's manufacturing overhead budget for the year totaled $4,500,000. The company planned to use 900,000 machine hours during this period, which is the firm's estimated practical capacity. Through the first 11 months of the year, a total of 830,000 machine hours were used, and actual manufacturing overhead amounted to $4,140,000.
During the month of December, machine hours and labor hours consisted of the following:
Account | Machine Hours | Labor Hours | Labor Cost |
CC723 | 12,000 | 11,600 | $122,400 |
CH291 | 4,400 | 3,600 | 43,200 |
PS812 | 19,500 | 14,300 | 200,500 |
DS444 | 14,000 | 12,500 | 138,000 |
Indirect labor | — | 3,000 | 29,400 |
Supervision | — | — | 57,600 |
Total | 49,900 | 45,000 | $591,100 |
The jobs completed in December and the unit sales for that month are as follows:
Job No | Production Items | Quantity Completed | Item | Quantity Shipped |
CC723 | Computer caddy | 20,000 | Computer caddy | 17,500 |
CH291 | Chair | 15,000 | Chair | 21,000 |
DS444 | Desks | 5,000 | Printer stand | 8,000 |
|
|
| Desk | 6,000 |
Required:
1. Describe when it is appropriate for a company to use a job-order costing system.
2. Calculate the balance in CompuFurn, Inc.'s Work-in-Process Inventory account as of December 31.
3. Calculate the cost of the chairs in CompuFurn, Inc.'s finished-goods Inventory as of December 31.
4. Actual manufacturing overhead incurred in December amounted to $252,000. Calculate CompuFurn's overapplied or underapplied overhead for the year.
5. Explain two alternative accounting treatments for overapplied or underapplied overhead balances when using a job-order costing system.
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