Reference no: EM131909930

Question - Connelly Upholstery, Inc., uses a job-order costing system to accumulate manufacturing costs. The company's work in process on December 31, 2013, consisted of one job (No. 2077), which was carried on the year end balance sheet at $156,800. The year end balance in the direct materials inventory was $80,000. There was no finished goods inventory on this date.

Connelly applies manufacturing overhead to production on the basis of direct labor cost. Budgeted totals for 2014 are:

Direct labor hours 50,000

Direct labor cost 4,200,000

Manufacturing overhead cost 5,460,000

Actual results for 2014 are:

Direct labor hours 60,000

Cost of direct materials purchased 5,800,000

Cost of direct materials used 5,600,000

Direct labor cost 4,350,000

Indirect material cost 65,000

Indirect labor cost 2,860,000

Factory depreciation expense 1,740,000

Factory insurance expense 59,000

Factory utilities expense 830,000

Selling and administrative expenses 2,160,000

Job No. 2077 was completed in January 2014. There was no work in process at year end. All jobs produced during 2014 were sold with the exception of Job No. 2143, which contained direct material costs of $156,000 and direct labor charges of $85,000 for the 650 direct labor hours worked on this job.

A. Determine the company's predetermined (aka budgeted) overhead application rate.

B. Compute the amount that Connelly would disclose on its December 31, 2014, balance sheet for

1. Direct materials inventory

2. Work in process inventory

3. Finished goods inventory

C. Compute the amount of over or under applied overhead at year end.

D. Calculate the unadjusted Cost of Goods Sold.

E. Calculate adjusted cost of goods sold for 2014 assuming the amount of under or over applied overhead computed in Part C is immaterial (insignificant).