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Content

Chapter3:ProductCostingandCostAccumulationinaBatchProduction
Environment

Cases
CompuFurn,Inc.manufacturesfurnitureforcomputerwork
stations.CompuFurnusesajobordercostingsystemand
employsabsorptioncosting.ComuFurn'sworkinprocess
inventoryonNovember30consistedofthefollowingjobs.

Case361
InterpretingInformation
fromaJobOrder
CostingSystem
(LO2,3,4,6)
3.Finishedgoods
inventory,12/31:13,400
units
4.Actualmanufacturing
overhead:$4,392,000

OnNovember30,thecompany'sfinishedgoodsinventory,which
isevaluatedusingthefirstin,firstout(FIFO)method,consisted
offouritems.

p.165

AttheendofNovember,thebalanceinCompuFurn'sMaterialsInventoryaccount,which
includesbothrawmaterialsandpurchasedparts,was$668,000.Additionstoandrequisitions
fromthematerialsinventoryduringthemonthofDecemberincludedthefollowing.

CompuFurnappliesmanufacturingoverheadonthebasisofmachinehours.Thecompany's

manufacturingoverheadbudgetfortheyeartotaled$4,500,000.Thecompanyplannedtouse
900,000machinehoursduringthisperiod,whichisthefirm'sestimatedpracticalcapacity.
Throughthefirst11monthsoftheyear,atotalof830,000machinehourswereused,and
actualmanufacturingoverheadamountedto$4,140,000.
DuringthemonthofDecember,machinehoursandlaborhoursconsistedofthefollowing:

ThejobscompletedinDecemberandtheunitsalesforthatmonthareasfollows:

Required:
1. Describewhenitisappropriateforacompanytouseajobordercostingsystem.
2. CalculatethebalanceinCompuFurn,Inc.'sWorkinProcessInventoryaccountasof
December31.
3. CalculatethecostofthechairsinCompuFurn,Inc.'sfinishedgoodsInventoryasof
December31.
4. ActualmanufacturingoverheadincurredinDecemberamountedto$252,000.Calculate
CompuFurn'soverappliedorunderappliedoverheadfortheyear.
5. Explaintwoalternativeaccountingtreatmentsforoverappliedorunderappliedoverhead
balanceswhenusingajobordercostingsystem.
(CMA,adapted)

FiberCom,Inc.,amanufactureroffiberopticcommunications
equipment,usesajobordercostingsystem.Sincetheproduction
processisheavilyautomated,manufacturingoverheadisapplied
onthebasisofmachinehoursusingapredeterminedoverhead
rate.Thecurrentannualrateof$15permachinehourisbased
onbudgetedmanufacturingoverheadcostsof$1,200,000anda
budgetedactivitylevelof80,000machinehours(thecompany's
estimatedpracticalcapacity).Operationsfortheyearhavebeen
completed,andalloftheaccountingentrieshavebeenmadefor

Case362
CostFlowsinaJob
OrderCostingSystem
ScheduleofCostof
GoodsManufactured
Automation
(LO2,3,4,5,6)
3.Manufacturing
overheadappliedin
December:$90,000

theyearexcepttheapplicationofmanufacturingoverheadtothe 6.Costofgoods
jobsworkedonduringDecember,thetransferofcostsfromWork manufactured:
inProcesstoFinishedGoodsforthejobscompletedin
$2,968,800
December,andthetransferofcostsfromFinishedGoodstoCost
ofGoodsSoldforthejobsthathavebeensoldduringDecember.
SummarizeddataasofNovember30andforthemonthof
Decemberarepresentedinthefollowingtable.JobsT11007,
N11013,andN11015werecompletedduringDecember.All
completedjobsexceptJobN11013hadbeenturnedoverto
customersbythecloseofbusinessonDecember31.
p.166

Required:
1. Explainwhymanufacturersuseapredeterminedoverheadratetoapplymanufacturing
overheadtotheirjobs.
2. HowmuchmanufacturingoverheadwouldFiberComhaveappliedtojobsthrough
November30oftheyearjustcompleted?
3. HowmuchmanufacturingoverheadwouldhavebeenappliedtojobsduringDecemberof
theyearjustcompleted?
4. Determinetheamountbywhichmanufacturingoverheadisoverappliedorunderappliedas
ofDecember31oftheyearjustcompleted.

5. DeterminethebalanceintheFinishedGoodsInventoryaccountonDecember31ofthe
yearjustcompleted.
6. PrepareaScheduleofCostofGoodsManufacturedforFiberCom,Inc.fortheyearjust
completed.(Hint:Incomputingthecostofdirectmaterialused,rememberthatFiberCom
includesbothdirectandindirectmaterialinitsRawMaterialInventoryaccount.)
(CMA,adapted)

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