Cases 4-1 Under or Overapplied Overhead Constructo Inc. is a manufacturer of furnishings for infants and children. The company uses a j job cost syste and employs a full absorption accounting method for cost accumulation. Constructo's work-in-process inventory at April 30, 2001 consisted of the following jobs. Job No. Items Units CBS102 Cribs 20,000 PLP086 Playpens 25,000 Dressers 25,000 DRS114 Accumulated Cost $900,000 420,000 250,000 $1,570,000 The company's finished goods inventory, which Constructo evaluates using the FIFO (First-in, first-ou method, consisted of five items. Quantity and Unit Cost Item Cribs 7,500 units @ $ 64 each Strollers 13,000 units @ $ 23 each Carriages 11,200 units @ $102 each Dressers 21,000 units @ $ 55 each Playpens 19,400 units @ $ 35 each Accumulated Cost $ 480,000 299,000 1,142,400 1,155,000 679.999 $3,755,400 Constructo applies factory overhead on the basis of direct labor hours. The company's factory overhead budget for the fiscal year ending May 31, 2001, totals $4,500,000, and the company plans to expend 600,000 direct labor hours during this period. Through the first eleven months of the year, a total of 555,000 direct labor hours were worked, and total factory overhead amounted to $4,273,500. At the end of April, the balance in Constructo'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 May included the following. 4-2 Raw Materials Purchased Parts Additions Requisitions: Job CBS102 Job PLP086 $242,000 $396,000 51,000 104,000 3,000 10,800 Job DRS114 124,000 87,000 Job STR077 (10,000 strollers) 62,000 Job CRG098 81,000 (5,000 carriages) 65,000 187,000 Blocher, Stout, Cokins, Chen: Cost Management 2008 Durin List F During the month of May, Constructo's factory payroll consisted of the following. CA mbru Hours Account CBS102 12,000 Cost $122,400 PLP086 4,400 43,200 DRS114 19,500 200,500 STR077 3,500 30,000 CRG098 14,000 138,000 Indirect 3,000 29,400 Supervision 57,600 $621,100 Listed below are the jobs that were completed and the unit sales for the month of May. REQUIRED: Quantity Job No. Items Complete CBS102 Cribs 20,000 PLP086 Playpens 15,000 STR077 Strollers 10,000 CRG098 Carriages 5,000 Quantity Items Shipped Cribs 17,500 Playpens 21,000 Strollers 14,000 Dressers 18,000 Carriages 6,000 1. Describe when it is appropriate for a company to use a job cost system. 2. Calculate the dollar balance in Constructo's work-in-process inventory account as of May 31, 2001. 3. Calculate the dollar amount related to the playpens in Constructo's finished goods inventory as of May 31, 2001. 4. Explain the proper accounting treatment for overapplied or underapplied overhead balances when using a job cost system. (CMA Adapted) boa numism 4-3