Part I

Chippen Corporation manufactures furniture, including tables. Selected costs are given below:

The tables are made of wood that costs $100 per table

The tables are assembled by workers, at a wage cost of $40 per table

Workers making the tables are supervised by a factory supervisor who is paid $38,000 per year

Electrical costs are $2 per machine hour. Four machine hours are required to produce a table

The depreciation on the machines used to make the tables totals $10,000 per year

The salary of the president of the company is $100,000 per year

The company spends $25,000 per year to advertise its products

Salespersons are paid a commission of $30 for each table sold

Instead of producing the tables, the company could rent its factory space for $50,000 per year

Required:

	Variable Cost	Fixed Cost	Period (Selling & Administrative) Cost	Product Cost Direct Materials	Product Cost Direct Labor	Product Cost Manufacturing Overhead	Sunk Cost	Opportunity Cost
1.
2.
3.
4.
5.
6.
7.
8.
9.

Part II

Bieker & Cie of Altdorf, Switzerland, makes furniture using the latest automated technology. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of machine hours. The currency in Switzerland is the Swiss franc, which is denoted by Sfr. The following estimates were used in preparing the predetermined overhead rate at the beginning of the year:

Machine Hours	75,000
Manufacturing overhead cost	Sfr900,000

During the year, a glut of furniture on the market resulted in cutting back production and a buildup of furniture in the companys warehouse. The companys cost records revealed the following actual cost and operating data for the year:

Machine Hours	60,000
Manufacturing Overhead Cost	Sfr850,000
Inventories at year end: Raw Materials Work in process Finished goods sold	Sfr 30,000 Sfr100,000 Sfr500,000
Cost of Goods Sold	Sfr 1,400,000

Required:

1. Compute the companys predetermined overhead rate

2. Compute the underapplied or overapplied overhead

3. Assume that the company closes any underapplied or overapplied overhead directly to Cost of Goods Sold. Prepare the appropriate journal entry.