Explain the meaning of T-accounts and its purpose.

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Chapter 2, Problem 12Q

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Explain the meaning of T-accounts and its purpose.

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Fine Furnishings manufactures upscale custom furniture. Cregg's currently uses a plantwide overhead rate based on direct labor hours to allocate its $1,290,000 of manufacturing overhead to individual jobs. However, Dana Cermak, owner and CEO, is considering refining the company's costing system by using departmental overhead rates. Currently, the Machining Department incurs $870,000 of manufacturing overhead, while the Finishing Department incurs $420,000 of manufacturing overhead. Cermak has identified machine hours (MH) as the primary manufacturing overhead cost driver in the Machining Department and direct labor (DL) hours as the primary cost driver in the Finishing Department. The Cregg's plant completed Jobs 450 and 455 on May 15. Both jobs incurred a total of 5 DL hours throughout the entire production process. Job 450 incurred 2 MH in the Machining Department and 4 DL hours in the Finishing Department (the other DL hour occurred in the Machining Department). Job 455 incurred…

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