Finlon Upholstery Inc. uses a job-order costing system to accumulate manufacturing costs. The company’s work-in-process on December 31, 20X1, 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 20X2 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.
Required:
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1. Determine the company s predetermined overhead application rate. |
2. Determine the additions to the Work-in-Process Inventory account for direct material used, direct
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