FiberCom, Inc., a manufacturer of fiber optic communications equipment, uses a job-order costing sys-tem. Since the production process is heavily automated, manufacturing overhead is applied on the basis of machine hours using a predetermined overhead rate. The current annual rate of $15 per machine hour is based on budgeted manufacturing overhead costs of $1,200,000 and a budgeted activity level of 80,000 machine hours (the companys estimated practical capacity). Operations for the year have been completed, and all of the accounting entries have been made for the year except the application of manu-facturing overhead to the jobs worked on during December, the transfer of costs from Work-in-Process to Finished-Goods for the jobs completed in December, and the transfer of costs from Finished Goods to Cost of Goods Sold for the jobs that have been sold during December. Summarized data as of November 30 and for the month of December are presented in the following table. Jobs T11-007, N11-013, and N11-015 were completed during December. All completed jobs except Job N11-013 had been turned over to customers by the close of business on December 31

Work-in-Process December Activity

Job No. Balance November 30 Direct Material Direct Labor Machine Hours

T11-007 .....................$ ??????87,000 $ ? 1,500 ..........................$ ? 4,500 ......................... 300

N11-013 .................... 55,000 ?? 4,000 .......................... 12,000 .........................1,000

N11-015 .................... -0- ?????? 25,600 .......................... 26,700 .........................1,400

D12-002 .................... -0- ?????? 37,900 .......................... ?20,000 .........................2,500

D12-003 .................... ??? -0- 26,000 .......................... 16,800 ......................... ? 800

Total .......................$142,000 $95,000 ..........................$80,000 .........................6,000

Operating Activity Activity through November 30 December Activity

Actual manufacturing overhead incurred:

Indirect material .................................... $ ?125,000 .......................... $ 9,000

Indirect labor ......................................... ? 345,000 .......................... 30,000

Utilities ................................................... ? 245,000 .......................... 22,000

Depreciation .......................................... 385,000 .......................... 35,000

Total overhead ...................................... $1,100,000 .......................... $96,000

Other data:

Raw-material purchases* ...................... $ ?965,000 .......................... $98,000

Direct-labor costs .................................. $ ?845,000 ......................... .$80,000

Machine hours ....................................... ?73,000 ......................... .6,000

.Account Balances at Beginning of Year January 1

Raw-material inventory* ............................ $105,000

Work-in-process inventory ......................... ? 60,000

Finished-goods inventory .......................... 125,000

*Raw-material purchases and raw-material inventory consist of both direct and indirect materials. The balance of the Raw-Material Inventory account as of December 31 of the year just completed is $85,000..

Required:

1. Explain why manufacturers use a predetermined overhead rate to apply manufacturing overhead to their jobs.

2. How much manufacturing overhead would FiberCom have applied to jobs through November 30 of the year just completed?

3. How much manufacturing overhead would have been applied to jobs during December of the year just completed?

4. Determine the amount by which manufacturing overhead is overapplied or underapplied as of December 31 of the year just completed.

5. Determine the balance in the Finished-Goods Inventory account on December 31 of the year just completed.

6. Prepare a Schedule of Cost of Goods Manufactured for FiberCom, Inc. for the year just completed. (Hint: In computing the cost of direct material used, remember that FiberCom includes both direct and indirect material in its Raw-Material Inventory account.)