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Assignment 3: Calculating 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. Use the following file naming convention: LastnameFirstInitial_M1_A3.doc. For example, if your name is John Smith, your document will be named SmithJ_M1_A3.doc.
| Assignment 3 Grading Criteria |
Maximum Points
|
| 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
|
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