Question
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 (5000 desks)
65 000
187 000
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 hours
Labour hours
Labour 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.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Auditing Cases An Active Learning Approach
Authors: Mark S. Beasley, Frank A. Buckless, Steven M. Glover, Douglas F. Prawitt
2nd Edition
0130674842, 978-0130674845
