MA16 Problem: Job Order Costing – Duench Incorporated

MA16 Problem: Job Order Costing – Duench Incorporated

Duench Inc., is a manufacturer of furnishings for infants and children. The company uses anormal job order costing system. Duench's WIP inventory at April 30, 20x4, consisted of thefollowing jobs:

 Job Number 

 Items

UnitsAccumulated Cost 

CBS1O2 Cribs 20,000 $ 900,000

PLPO86 Playpens 15,000 420,000DRS 114 Dressers 25,000 250,000

$1,570,000

The company's finished goods inventory, using the FIFO method, consisted of five items:

 Item Quantity And Unit Cost Accumulated Cost 

Cribs 7,500 units @ $64 each $ 480,000Strollers 13,000 units @ $23 each 299,000Carriages 11,200 units @ $102 each 1,142,400Dressers 21,000 units @ $55 each 1,155,000Playpens 19,400 units @ $35 each 679,000

$3,755,400

Duench applies factory overhead on the basis of direct labor hours. The company's factoryoverhead budget for the fiscal year ending May 31, 20x4, totaled $4,500,000, and the company plans to expend 600,000 direct labour hours during this period. Through the first 11 months of the year, a total of 555,000 direct labour hours were worked, and total factory overheadamounted to $4,273,500.At the end of April, the balance in Duench's raw materials inventory account, which includes both raw materials and purchased parts, was $668,000. Additions to and requisitions from rawmaterials inventory during the month of May included the following:

 Raw Materials Purchased  Parts

Additions $242,000 $396,000Requisitions:Job CBS102 51,000 104,000Job PLP086 3,000 10,800Job DRS 114 124,000 87,000Job STRO77 (10,000 strollers) 2,000 81,000Job CRGO98 (5,000 carriages) 65,000187,000

During the month of May, Duench's factory payroll consisted of the following:

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CMA Ontario

P-31

 Account Hours Cost 

CBS102 12,000 $122,400PLP086 4,400 43,200DRS114 19,500 200,500STR077 3,500 30,000CRG098 14,000 138,000Indirect 3,000 29,400Supervision 57,600$621,100The following are the jobs that were completed and the unit sales for the month of May:

 Job number Items Quantity

CBS102 Cribs 20,000PLPO86 Playpens 15,000STRO77 Strollers 10,000CRGO98 Carriages 5,000

 ItemsQuantityShipped 

Cribs 17,500Playpens 21,000Strollers 14,000Dressers 18,000Carriages 6,000 

 Required -

a. Describe when it is appropriate for a company to use a job order cost system. b. Calculate the dollar balance in Duench's WIP inventory account as of May31, 20x4.c. Calculate the dollar amount related to the playpens in Duench 's finishedgoods inventory as of May 31, 20x4.d. Explain the proper accounting treatment for over- or underapplied overhead balanceswhen using a job order cost system.