Inventory

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

Total $17,664,000.00

 

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.

 

Grading Criteria
Calculated the company’s predetermined overhead application rate.	24
Calculated the additions to the work-in-process inventory account for the direct material used, direct labor, and manufacturing overhead.	16
Calculated the finished-goods inventory for the balance sheet dated 12/31/02.	20
Calculated the over-applied or under-applied overhead at year-end.	20
Explained if it is appropriate to include the selling and administrative expenses in the cost of goods sold category.	12
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.	8
Total:	100