C4.43 LO 4.6 Interpreting information from a job costing system: manufacturer CompuFurn Ltd manufactures furniture for computer work stations. CompuFurn uses a job costing system. The work in process inventory on 30 November consisted of the following jobs. Job No. Description Units Total cost CC723 Computer caddy 20000 $ 900.000 CH291 Chair 15000 431000 PS812 Printer stand 25000 250000 Total $1581000 On 30 November, the company's finished goods inventory consisted of four items. Item Computer caddy Chair Printer stand Quantity and unit cost Total cost 7500 units $64 each $ 480000 19400 units @ $35 each 21000 units @ $55 each 679000 1155000 11200 units @ $102 each 1 142 400 Desk Total $3456 400 At the end of November, the balance in CompuFurn's materials inventory account, which includes both raw materials and purchased parts, was $668000. Additions to and requisitions from the materials inventory during December included the following. Additions and requisitions Additions Raw materials $242000 Purchased parts $396000 Requisitions: Job CC723 51000 104 000 Job CH291 3000 10800 Job PS812 124000 87000 Job DS444 (5000 desks) 65000 187000 CompuFurn applies manufacturing overhead on the basis of machine hours. The company's manufacturing overhead budget for the year totalled $4500000. 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 830000 machine hours were used, and actual manufacturing overhead amounted to $4 140000. During December, machine hours and labour hours consisted of the following: Machine hours 12000 Labour hours 11600 Account CC723 CH291 4400 3600 PS812 19500 14 300 DS444 14000 12500 Indirect labour 3000 Supervision Total 49900 45000 Labour cost $122400 43 200 200 500 138000 29400 57 600 591100 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 20000 Computer caddy 17500 CH291 Chair 15000 Chair 21000 DS444 Desk 5000 Printer stand 18000 Desk 6000 Required 1. Describe when it is appropriate for a company to use a job costing system. 2. Calculate the balance in CompuFurn's work in process inventory account as at 31 December. 3. Calculate the cost of the chairs in CompuFurn's finished goods inventory as at 31 December. 4. Actual manufacturing overhead incurred in December amounted to $252000. 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 costing system.