Calculating Inventory (Doc)
Added on - 30 Sep 2019
Calculating InventoryFinlon Upholstery Inc. uses a job-order costing system to accumulate manufacturing costs. Thecompany's work-in-process on December 31, 2001, consisted of one job (no. 2077), which was carried onthe 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 budgeteddirect-labor cost is the company's practical capacity, in terms of direct-labor hours multiplied by thebudgeted direct-labor rate.) Budgeted totals for 2002 for direct labor and manufacturing overhead are$4,200,000 and $5,460,000, respectively. Actual results for the year are as follows:Actual ResultsDirect Materials Used$5,600,000.00Direct Labor$4,350,000.00Indirect Material Used$65,000.00Indirect Labor$2,860,000.00Factory Depreciation$1,740,000.00Factory Insurance$59,000.00Factory Utilities$830,000.00Selling and Administrative Expenses$2,160,000.00Total$17,664,000.00Job no. 2077 was completed in January 2002, and there was no work in process at year-end. All jobsproduced during 2002 were sold with the exception of Job no. 2143, which contained direct-material costsof $156,000 and direct-labor charges of $85,000. The company charges any under- or over-appliedoverhead to the cost of goods sold category.Using the above information, do the following:Calculate the company’s predetermined overhead application rate.Calculate the additions to the work-in-process inventory account for the direct material used,direct labor, and manufacturing overhead.Calculate the finished-goods inventory for the 12/31/02 balance sheet.Calculate the over-applied or under-applied overhead at year-end.Explain if it is appropriate to include selling and administrative expenses in the cost of goods soldcategory.Perform your calculations in an Excel spreadsheet and copy the calculations into a Word document.