Question -
ErgoFurn, Inc. manufactures ergonomically designed computer furniture. ErgoFurn uses a job order costing system. On November 30, the Work in Process Inventory consisted of the following jobs:
|
Job No.
|
Item
|
Units
|
Accumulated Cost
|
|
CC723
|
Computer caddy
|
23,000
|
$940,000
|
|
CH291
|
Chair
|
19,000
|
440,000
|
|
PS812
|
Printer stand
|
29,000
|
280,000
|
|
|
|
$1,660,000
|
On November 30, ErgoFurn's Raw Materials Inventory account totaled $698,000, and its Finished Goods Inventory totaled $3,458,400. ErgoFurn applies manufacturing overhead on the basis of machine hours. The company's manufacturing overhead budget for the year totaled $4,500,000, and the company planned to use 900,000 machine hours during the year. Through the first eleven months of the year, the company used a total of 842,000 machine hours, total factory overhead amounted to $4,274,500, and Cost of Goods Sold was $4,274,500.
ErgoFurn purchased $8,770,250 in raw materials in December and incurred the following costs for jobs in process that month:
|
Job No.
|
Materials
Issued
|
Machine
Hours
|
Direct Labor
Hours
|
Direct Labor
Cost
|
|
CC723
|
$155,000
|
13,000
|
14,000
|
$122,400
|
|
CH291
|
$19,800
|
4,900
|
4,000
|
$46,200
|
|
PS812
|
$228,000
|
23,500
|
16,300
|
$223,500
|
|
DS444
|
$253,000
|
18,000
|
17,500
|
$139,000
|
The following jobs were completed in December and transferred to the Finished Goods Inventory:
|
Job No.
|
Item
|
Units
|
|
CC723
|
Computer caddy
|
23,000
|
|
CH291
|
Chair
|
19,000
|
|
DS444
|
Desk
|
10,000
|
Assume that ErgoFurn sold 14,000 computer caddies, 11,200 chairs, and 4,500 desks in December.
ErgoFurn incurred $395,000 in manufacturing overhead in December. Given that expenditure, was manufacturing overhead under- or overapplied for the year? By how much?
Assume that ErgoFurn closes under- or overapplied overhead to the Cost of Goods Sold account. Prepare the journal entry to close the manufacturing overhead account.