CompuFurn, Inc. manufactures furniture for computer workstations. CompuFurn uses a joborder costing system and employs absorption costing. ComuFurn's...
CompuFurn, Inc. manufactures furniture for computer workstations. CompuFurn uses a job-order costing system and employs absorption costing. ComuFurn’s work-in-process inventory on November 30 consisted of the following jobs:
| JOB NUMBER | DESCRIPTION | UNIT | ACCUMULATED COSTS |
| 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 November 30, the company’s finished-goods inventory, which is evaluated using the first-in, first-out (FIFO) method, consisted of four items:
| ITEM | QUANTITY & UNIT COSTS | ACCUMULATED COSTS | ||||||||
| 7,500 units @ $64 | $480,000 | ||||||||
| 19,400 units @ $35 each | $679,000 | ||||||||
| Printer Stand | 21,000 units @ $55 each | $1,155,000 | ||||||||
| Desk | 11,200 units @ $102 each | $1,142,400 | ||||||||
| 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 the month of December included the following:
| ADDITIONS | RAW MATERIALS | PURCHASED PARTS |
| Purchases | $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 (5,000 desks) | $65,000 | 187,000 |
CompuFurn applies manufacturing overhead on the basis of machine hours. The company’s manufacturing overhead budget for the year totaled $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 manufacturing overhead amounted to $4,140,000.
During the month of December, machine hours and labor hours consisted of the following:
| ACCOUNT | MACHINE HOURS | LABOR HOURS | 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 Labor | --- | 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 | Desks | 5,000 | Printer Stand | 18,000 |
| Desks | 6,000 |
REQUIRED:
1. Describe when it is appropriate for a company to use a job-order costing system.
2. Calculate the balance in CompuFurn, Inc.’s Work-in-Process Inventory account as of December 31.
3. Calculate the cost of the chairs in CompuFurn, Inc.’s finished-goods Inventory as of December 31.
4. Actual manufacturing overhead incurred in December amounted to $252,000. Calculate CompuFurn’s overapplied or underapplied overhead for the year.
5. Explain two alternative accounting treatments for overapplied or underapplied overhead balances when using a job-order costing system.
