ACCT 002 Lecture Notes - Lecture 7: Income Statement
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CompuFurn, Inc. manufactures furniture for computer workstations. CompuFurn uses a job-order costing system and employs absorption costing. ComuFurnâs 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 companyâs 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 CompuFurnâs 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 companyâs 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 firmâs 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.âs Work-in-Process Inventory account as of December 31.
3. Calculate the cost of the chairs in CompuFurn, Inc.âs finished-goods Inventory as of December 31.
4. Actual manufacturing overhead incurred in December amounted to $252,000. Calculate CompuFurnâs 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.
All questions have to do with cost accounting systems,more in particular, job order costing.
Complete each of the following statements/Answer the followingquestions
1. A custom-furniture designer would probably use which methodof cost accounting? 1. ____
2. The cost of finished products on hand that have not been soldis called 2. ____
3-5. Work in process consists of these costs that have enteredthe manufacturing process on unfinished products:
3. ____
4. ____
5. ____
6. The accounting system that accumulates the product costsoriginating with inventory and ending with the cost of goods soldis the 6. ____
7. The system best suited to industries that manufacture customgoods to fill special orders is referred to as a 7. ____
8. The system that accumulates costs for each of the departmentswithin the factory is a 8. ____
9. The Receiving Department document that shows the quantityreceived and its condition is the 9. ____
10. Materials are released from the storeroom to the factory inresponse to a 10. ____
11. The amount of time spent by an employee in the factory isusually recorded on 11. ____
12. Indirect materials and indirect labor are examples of thismanufacturing cost 12. ____
13. The costing method that accumulates and allocates factoryoverhead costs to products using many overhead rates is 13.____
14. If estimated total factory overhead costs are $75,000 anddirect labor hours are 15,000, the predetermined factory overheadrate is 14. ____
15. The process of assigning factory overhead costs to a costobject is termed 15. ____
16. In highly-automated factory settings, a widely used activitybase for predetermining a factory overhead rate is 16. ____
17. The subsidiary ledger that contains cost data for the unitsmanufactured, units sold, and units on hand is 17. ____
18. The direct labor and overhead costs of a service businessare accumulated in a 18. ____
19. If the actual factory overhead costs exceed the amount offactory overhead applied, the factory overhead account balance willbe a (debit or credit) 19. ____
20. The factory overhead in Question 19 is said to be 20.____
21. The source of the data for debiting Work in Process fordirect materials is a 21. ____
22. The accounting document that is used to accumulate the costsfor each clientâs job in a service business is a 22. ____
23. The controlling account for the cost ledger is 23. ____
24. The measure used to allocate overhead that reflects itsconsumption is called 24. ____
Indicate the titles of the accounts to be debited andcredited in recording the summarized operations presented below byinserting the letter or letters of the account titles listed in theappropriate columns.
ACCOUNTS
A. Accounts Payable E. FactoryOverhead I. Selling and AdministrativeExpenses
B. Accounts Receivable F.Finished Goods J. Wages Payable
C. Cash G. MaterialsK. Work in Process
D. Cost of Goods Sold H.Sales
TRANSACTIONS | Debit | Credit | ||
0. Cash paid on account...................................................................................... | A | 0. ____ | C | 0. ____ |
1-2. Materials requisitioned for use on specific jobsand for general factory use....................................................................................................................... |
|
| ||
3-4. Factory labor incurred on specific jobs and forgeneral factory use ....... | 3. ____ | 4. ____ | ||
5-6. Applied factory overhead to jobs................................................................... | 5. ____ | 6. ____ | ||
7-8. Paid salary of vice-president of finance....................................................... | 7. ____ | 8. ____ | ||
9-10. Cashpaid for overhead costs incurred......................................................... | 9. ____ | 10. ____ | ||
11-12. Transferred smallbalance of under-applied overhead ............................ | 11. ____ | 12. ____ | ||
13-14. Jobs completed................................................................................................. | 13. ____ | 14. ____ |