CompuFurn, Inc. manufactures furniture for computer workstations. CompuFurn uses a job-order costing system and employs absorption costing. ComuFurns work-in-process inventory on November 30 consisted of the following jobs:

JOB NUMBER	DESCRIPTION	UNIT	ACCUMULATED COSTS
CC723	Computer Caddy	20,000	$900,000
CH291	Chair	15,000	$431,000
PS812	Printer Stand	25,000	$250,000
Total			$1,581,000

On November 30, the companys finished-goods inventory, which is evaluated using the first-in, first-out (FIFO) method, consisted of four items:

ITEM

QUANTITY & UNIT COSTS

ACCUMULATED COSTS

Computer Caddy

7,500 units @ $64

$480,000

Chair

19,400 units @ $35 each

$679,000

Printer Stand

21,000 units @ $55 each

$1,155,000

Desk

11,200 units @ $102 each

$1,142,400

Total

$3,456,400

At the end of November, the balance in CompuFurns 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 December included the following:

ADDITIONS	RAW MATERIALS	PURCHASED PARTS
Purchases	$242,000	$396,000
Requisitions:
Job CC723	$51,000	$104,000
Job CH291	$3,000	$10,800
Job PS812	$124,000	$87,000
Job DS444 (5,000 desks)	$65,000	187,000

CompuFurn applies manufacturing overhead on the basis of machine hours. The companys manufacturing overhead budget for the year totaled $4,500,000. The company planned to use 900,000 machine hours during this period, which is the firms estimated practical capacity. Through the first 11 months of the year, a total of 830,000 machine hours were used, and actual manufacturing overhead amounted to $4,140,000.

During the month of December, machine hours and labor hours consisted of the following:

ACCOUNT	MACHINE HOURS	LABOR HOURS	COST
CC723	12,000	11,600	$122,400
CH291	4.400	3,600	$43,200
PS812	19,500	14,300	$200,500
DS444	14,000	12,500	$138,000
Indirect Labor	---	3,000	$29,400
Supervision	---	---	$57,600
Total	49,900	45,000	$591,100

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	20,000	Computer Caddy	17,500
CH291	Chair	15,000	Chair	21,000
DS444	Desks	5,000	Printer Stand	18,000
			Desks	6,000

REQUIRED:

1. Describe when it is appropriate for a company to use a job-order costing system.

2. Calculate the balance in CompuFurn, Inc.s Work-in-Process Inventory account as of December 31.

3. Calculate the cost of the chairs in CompuFurn, Inc.s finished-goods Inventory as of December 31.

4. Actual manufacturing overhead incurred in December amounted to $252,000. Calculate CompuFurns overapplied or underapplied overhead for the year.

5. Explain two alternative accounting treatments for overapplied or underapplied overhead balances when using a job-order costing system.