Reference no: EM131632856

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.