Finlon Upholstery Inc. uses a joborder costing system to accumulate manufacturing costs. The
company’s workinprocess on December 31, 2001, consisted of one job (no. 2077), which was
carried on the yearend balance sheet at $156,800. There was no finishedgoods inventory on this
Finlon applies manufacturing overhead to production on the basis of directlabor cost. (The budgeted
directlabor cost is the company’s practical capacity, in terms of directlabor hours multiplied by the
budgeted directlabor 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:
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
Job no. 2077 was completed in January 2002, and there was no work in process at yearend. All jobs
produced during 2002 were sold with the exception of Job no. 2143, which contained directmaterial
costs of $156,000 and directlabor charges of $85,000. The company charges any under or overapplied
overhead to the cost of goods sold category.
Using the above information, do the following:
•Calculate the company’s predetermined overhead application rate.
•Calculate the additions to the workinprocess inventory account for the direct material used, direct
labor, and manufacturing overhead.
•Calculate the finishedgoods inventory for the 12/31/02 balance sheet.
•Calculate the overapplied or underapplied overhead at yearend.
•Explain if it is appropriate to include selling and administrative expenses in the cost of goods sold
Perform your calculations in an Excel spreadsheet and copy the calculations into a Word document.
Write a 1page paper in Word format. Apply APA standards to citation of sources. Use the following
file naming convention: LastnameFirstInitial_M1_A3.doc. For example, if your name is John Smith,
your document will be named SmithJ_M1_A3.doc.