M2A2 Assignment 2: 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.

Save your time - order a paper!

Get your paper written from scratch within the tight deadline. Our service is a reliable solution to all your troubles. Place an order on any task and we will take care of it. You won’t have to worry about the quality and deadlines

Order Paper Now

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 12/31/01 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_M2_A2.doc.