Finlon Upholstery, Inc. uses a job-order costing system to accumulate manufacturing costs. The companys work-in-process on December 31, 20x1, consisted of one job (no. 2077), which was carried on the year-end balance sheet at $156,800. There was no finished-goods inventory on this date.

Finlon applies manufacturing overhead to production on the basis of direct-labor cost. (The budgeted direct-labor cost is the companys practical capacity, in terms of direct-labor hours, multiplied by the budgeted direct-labor rate.) Budgeted totals for 20x2 for direct labor and manufacturing overhead are $4,200,000 and $5,544,000, respectively. Actual results for the year follow.

Direct material used	$	5,550,000
Direct labor		4,350,000
Indirect material used		65,000
Indirect labor		2,860,000
Factory depreciation		1,740,000
Factory insurance		58,000
Factory utilities		830,000
Selling and administrative expenses		2,160,000
Total	$	17,613,000

Job no. 2077 was completed in January 20x2; there was no work in process at year-end. All jobs produced during 20x2 were sold with the exception of job no. 2143, which contained direct-material costs of $154,000 and direct-labor charges of $85,000. The company charges any under- or overapplied overhead to Cost of Goods Sold.

Required:

1. Determine the companys predetermined overhead application rate.

2. Determine the additions to the Work-in-Process Inventory account for direct material used, direct labor, and manufacturing overhead.

3. Compute the amount that the company would disclose as finished-goods inventory on the December 31, 20x2, balance sheet.

4. Prepare the journal entry needed to record the years completed production.

5-a. Compute the amount of under- or overapplied overhead at year-end

6. Determine the companys 20x2 cost of goods sold.

Finished-goods inventory, Jan. 1
Cost of goods available for sale
Unadjusted cost of goods sold
Cost of goods sold

7. Would it be appropriate to include selling and administrative expenses in either manufacturing overhead or cost of goods sold