M1 assignment 3: calculating inventory

Assignment 3: Calculating Inventory

Finlon Upholstery Inc. uses a job-order costing system to accumulate  manufacturing costs. The company’s work-in-process on December 31, 2001,  consisted of one job (no. 2077), which was carried on the 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 budgeted direct-labor cost is the company’s  practical capacity, in terms of direct-labor hours multiplied by the  budgeted 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 Results   Direct Materials Used $5,600,000.00   Direct Labor $4,350,000.00   Indirect Material Used $65,000.00   Indirect Labor $2,860,000.00   Factory Depreciation $1,740,000.00   Factory Insurance $59,000.00   Factory Utilities $830,000.00   Selling and Administrative Expenses $2,160,000.00   Total $17,664,000.00    

Job no. 2077 was completed in January 2002, and there was no work in  process at year-end. All jobs produced during 2002 were sold with the  exception of Job no. 2143, which contained direct-material costs of  $156,000 and direct-labor charges of $85,000. The company charges any  under- or over-applied overhead 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 sold category.

Perform your calculations in an Excel spreadsheet and copy the calculations into a Word document.

Write a 1-page paper in Word format. Apply APA standards to citation  of sources. Use the following file naming convention:  LastnameFirstInitial_M1_A3.doc. For example, if your name is John Smith,  your document will be named SmithJ_M1_A3.doc.

By the due date assigned, deliver your assignment to the Submissions Area.

     Assignment 3 Grading Criteria   Max Points     

Calculated the company’s predetermined overhead application rate.

24     

Calculated the additions to the work-in-process inventory account for  the direct material used, direct labor, and manufacturing overhead.

16     

Calculated the finished-goods inventory for the balance sheet dated 12/31/02.

20     

Calculated the over-applied or under-applied overhead at year-end.

20     

Explained if it is appropriate to include the selling and administrative expenses in the cost of goods sold category.

12     

Wrote in a clear, concise, and organized manner; demonstrated ethical  scholarship in accurate representation and attribution of sources; and  displayed accurate spelling, grammar, and punctuation.

8    Total:  100