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CompuFurn Ltd manufactures furniture for computer work stations. The company uses a job costing system. The work in process inventory on 30 November consisted of

CompuFurn Ltd manufactures furniture for computer work stations. The company 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 20 000. $ 900 000

CH291 Chair. 15 000. 431 000

PS812 Printer stand 25 000 250 000

Total. $ 1 581 000

On 30 November, the company's finished goods inventory consisted of four items:

Item. Quantity and unit cost Total cost

Computer caddy 7 500 units @ $64 each. $ 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. 1 142 000

Total. $ 3 456 400

At the end of November, the balance in CompuFurn's materials inventory account, which includes both raw materials and purchased parts, was $668 000. Additions to and requisitions from the materials inventory during December included the following.

Additions and requisitions. Raw materials Purchased parts

Additions $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 65 000 187 000

(5000 desks)

CompuFurn applies manufacturing overhead on the basis of machine hours. The company's manufacturing overhead budget for the year totals $4 500 000. 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 830 000 machine hours were used, and actual overhead amounted to $4 140 000.

During December, machine hours and labour hours consisted of the following:

Account. Machine hoursLabour hoursLabour 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 labour. - 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. Desk 5 000 Printer stand 18 000

Desk 6 000

Required:

i.Explain when it is appropriate for a company to use a job costing system.

ii.Calculate the balance in CompuFurn's work in process inventory account as at 31 December.

iii.Calculate the cost of the chairs in CompuFurn's finished goods inventory as at 31 December.

iv.Actual manufacturing overhead incurred in December amounted to $252 000. Calculate CompuFurn's overapplied or underapplied overhead for the year.

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

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