Chapter 3, Problem 61C

CompuFurn, Inc. manufactures furniture for computer work stations. CompuFurn uses a job-order costing system and employs absorption costing. ComuFurn’s work-in-process inventory on November 30 consisted of the following jobs.

On November 30, the company’s finished-goods inventory, which is evaluated using the first-in, first-out (FIFO) method, consisted of four items.

At the end of November, the balance in CompuFurn’s Materials Inventory account, which includes both raw materials and purchased parts, was $668,000. Additions to and requisitions from the materials inventory during the month of December included the following.

CompuFurn applies manufacturing overhead on the basis of machine hours. The company’s manufacturing overhead budget for the year totaled $4,500,000. The company planned to use 900,000 machine hours during this period, which is the firm’s estimated practical capacity. Through the first 11 months of the year, a total of 830,000 machine hours were used, and actual manufacturing overhead amounted to $4,140,000.

During the month of December, machine hours and labor hours consisted of the following:

The jobs completed in December and the unit sales for that month are as follows:

Required:

1. 1. Describe when it is appropriate for a company to use a job-order costing system.
2. 2. Calculate the balance in CompuFurn, Inc.’s Work-in-Process Inventory account as of December 31.
3. 3. Calculate the cost of the chairs in CompuFurn, Inc.’s finished-goods Inventory as of December 31.
4. 4. Actual manufacturing overhead incurred in December amounted to $252,000. Calculate Compu-Furn’s over applied or under applied overhead for the year.
5. 5. Explain two alternative accounting treatments for over applied or under applied overhead balances when using a job-order costing system.