Question

FiberCom, Inc., a manufacturer of fiber optic communicationsequipment, uses a job-order costing sys-tem. Since the productionprocess is heavily automated, manufacturing overhead is applied onthe basis of machine hours using a predetermined overhead rate. Thecurrent annual rate of $15 per machine hour is based on budgetedmanufacturing overhead costs of $1,200,000 and a budgeted activitylevel of 80,000 machine hours (the company’s estimated practicalcapacity). Operations for the year have been completed, and all ofthe accounting entries have been made for the year except theapplication of manu-facturing overhead to the jobs worked on duringDecember, the transfer of costs from Work-in-Process toFinished-Goods for the jobs completed in December, and the transferof costs from Finished Goods to Cost of Goods Sold for the jobsthat have been sold during December. Summarized data as of November30 and for the month of December are presented in the followingtable. Jobs T11-007, N11-013, and N11-015 were completed duringDecember. All completed jobs except Job N11-013 had been turnedover to customers by the close of business on December 31

Work-in-Process December Activity

Job No. Balance November 30 Direct Material Direct Labor MachineHours

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 DecemberActivity

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 ofboth direct and indirect materials. The balance of the Raw-MaterialInventory account as of December 31 of the year just completed is$85,000..

Required:

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

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

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

4. Determine the amount by which manufacturing overhead isoverapplied or underapplied as of December 31 of the year justcompleted.

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

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

NEED #6 FIGURED OUT PLEASE