Inventory 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
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.
Perform your calculations in an Excel spreadsheet and copy the calculations into a Word document. Write a 1 page paper in Word format. Apply APA standards to citation of sources.
|Calculated the company’s predetermined overhead application rate.||
|Calculated the additions to the work in process inventory account for the direct material used, direct labor, and manufacturing overhead.||
|Calculated the finished goods inventory for the balance sheet dated 12/31/02.||
|Calculated the over applied or under applied overhead at year end.||
|Explained if it is appropriate to include the selling and administrative expenses in the cost of goods sold category.||
|Wrote in a clear, concise, and organized manner; demonstrated ethical scholarship in accurate representation and attribution of sources; and displayed accurate spelling, grammar, and punctuation.||