Order instructions
Consider the following costs that were incurred during the current year:
- Tire costs incurred by Ford Motor Company.
- Sales commissions paid to the sales force of Dell Inc.
- Wood glue consumed in the manufacture of Thomasville furniture.
- Hourly wages of refinery security guards employed by ExxonMobil Corporation.
- The salary of a financial vice president of Hewlett Packard.
- Advertising costs of Coca-Cola.
- Straight-line depreciation on factory machinery of Boeing Corporation.
- Wages of assembly-line personnel of Whirlpool Corporation.
- Delivery costs on customer shipments of Ben & Jerry’s ice cream.
- Newsprint consumed in printing The New York Times.
- Plant insurance costs of Texas Instruments.
- Glass costs incurred in light-bulb manufacturing of General Electric.
Required: Evaluate each of the preceding and determine whether the cost is ( a ) a product cost or a period cost, ( b ) variable or fixed in terms of behavior, and ( c ) for the product costs only, whether the cost is properly classified as direct material, direct labor, or manufacturing overhead.
Item 1 is done as an example: Tire costs: Product cost, variable, direct material
3-46
Finlon Upholstery, Inc. uses a job-order costing system to accumulate manufacturing costs. The com-pany’s work-in-process on December 31, 20×1, 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 20×2 for direct labor and man-ufacturing overhead are $4,200,000 and $5,460,000, respectively. Actual results for the year follow.
Direct material used ……………………………………………………………………………..$ 5,600,000
Direct labor …………………………………………………………………………………………4,350,000
Indirect material used ……………………………………………………………………………65,000
Indirect labor ………………………………………………………………………………………2,860,000
Factory depreciation ……………………………………………………………………………..1,740,000
Factory insurance ………………………………………………………………………………..59,000
Factory utilities ……………………………………………………………………………………830,000
Selling and administrative expenses ………………………………………………………… 2,160,000
Total ………………………………………………………………………………………………$17,664,000
Job no. 2077 was completed in January 20×2; there was no work in process at year-end. All jobs pro-duced during 20×2 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 overapplied over-head to Cost of Goods Sold.
Required:
- Determine the company’s predetermined overhead application rate.
- Determine the additions to the Work-in-Process Inventory account for direct material used, direct labor, and manufacturing overhead.
- Compute the amount that the company would disclose as finished-goods inventory on the December 31, 20×2, balance sheet.
- Prepare the journal entry needed to record the year’s completed production.
- Compute the amount of under- or overapplied overhead at year-end, and prepare the necessary journal entry to record its disposition.
- Determine the company’s 20×2 cost of goods sold.
- Would it be appropriate to include selling and administrative expenses in either manufacturing overhead or cost of goods sold? Briefly explain.
