what approach does the company use to adjust the over or under application of overhead?

Turramurra Furniture Company manufactures specialist furniture for use with computers .It uses a FIFO costing system to allocate costs to Finished Goods and maintains its financial records on a financial year which operates from 1 July 2016 to 30 June 2017 .The Work in Process Inventory on 31 May 2017 consisted of the following :Job No.      Description                                   Units                      Accumulated CostSE523         Storage Equipment                     20,000                  $ 860,000PS612         Printer Stand                                25,000                      300,000CH421        Chair                                              15,000                       431,000Total                                                                                                  $1,591,000The Finished Goods Inventory at 31 May 2017 was as follows :Item Description                               Quantity and Unit cost          Accumulated CostStorage Equipment                            7,500 units at $64 each            $  480,000Printer Stand                                      21,000 units at $55 each              1,155,000Chair                                                    19,400 units at $35 each                679,000Desk                                                     11,200 units at $102each            1,142,400Total                                                                                                            $3,456,400At the end of May 2017 the balance in Turramurra Furniture Company ‘s Material Inventory Accountwas $579,000 .Purchases of Material Inventory during June were $622,000.The Raw Material requisitioned for jobs during June were as follows:Job No.                            $SE523                                       167,000PS612                                       221,000CH421                                       13,800DS174(5000 desks)                252,000Turramurra Furniture Company applies manufacturing overhead on the basis of machine hours.The manufacturing overhead budgetfor the year totalled $4,500,000 and the company budgeted it would be using 900,000 machine hours .From July 2016 to the end of May 2017 the company has used 835,000 machine hours and its actual manufacturing overhead has amounted to $4,105,000.During the month of June 2017 machine hours ,labour hours and labour cost was as follows:Job No                          Machine Hours               Labour Hours                Labour CostSE523                                12,000                          11,600                               $ 122,400PS612                                19,500                          14,300                                  200,500CH421                                  4,400                            3,600                                    43,200DS174                                14,000                          12,500                                 138,000  Indirect labour                                                            3,000                                  29,400Supervision                                                                                                            57,600Total                                  49,900                           45,000                                 591,100          The jobs completed in June 2017 and the unit sales during June 2017 were as follows:Job No          Description                    Quantity completed           Unit salesSES523        Storage Equipment         20,000                                 17,500PS612          Printer Stand                         0                                      18,000CH421         Chairs                                 15,000                                 21,000DS174          Desks                                    5,000                                   6,000Required: (a)Describe the circumstances when a job order costing system should be used (b)Calculate,showing working, the balance in Turramurra Furniture Company’s Work in Process     Account at 30 June 2017.(c)Calculate the cost of the chairs in the Finished Goods Inventory at 30 June 2017(d)Actual manufacturing overhead incurred in June amounted to 217,000 .Calculate the over or underapplied overhead for the year.(e) Outline two different treatments for the over or underapplied overhead balances when using a job order costing system.( f)If the Turramurra Furniture Company considers that a variation of $40,000 in the over or underapplication of overhead is material and must be dealt with appropriately in the accountsis the variation(over or underapplication of overhead) material? If it is what approach does the company use to adjust the over or underapplication of overhead?(g) The company is concerned with its calculation and application of overhead and has asked you to advise if it should consider using Activity Based Costing as it is considering expanding its product range and its concerns about overhead application

 
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