Turramurra Furniture Company manufactures specialist furniture for use with computers .

Turramurra Furniture Company manufactures specialist furniture for use with computers ..

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 Cost

SE523         Storage Equipment                     20,000                  $ 860,000

PS612         Printer Stand                                25,000                      300,000

CH421        Chair                                              15,000                       431,000

Total                                                                                                  $1,591,000

The Finished Goods Inventory at 31 May 2017 was as follows :

Item Description                               Quantity and Unit cost          Accumulated Cost

Storage Equipment                            7,500 units at $64 each            $  480,000

Printer Stand                                      21,000 units at $55 each              1,155,000

Chair                                                    19,400 units at $35 each                679,000

Desk                                                     11,200 units at $102each            1,142,400

Total                                                                                                            $3,456,400

At the end of May 2017 the balance in Turramurra Furniture Company ‘s Material Inventory Account

was $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                                       167,000

PS612                                       221,000

CH421                                       13,800

DS174(5000 desks)                252,000

Turramurra 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 Cost

SE523                                12,000                          11,600                               $ 122,400

PS612                                19,500                          14,300                                  200,500

CH421                                  4,400                            3,600                                    43,200

DS174                                14,000                          12,500                                 138,000  

Indirect labour                                                            3,000                                  29,400

Supervision                                                                                                            57,600

Total                                  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 sales

SES523        Storage Equipment         20,000                                 17,500

PS612          Printer Stand                         0                                      18,000

CH421         Chairs                                 15,000                                 21,000

DS174          Desks                                    5,000                                   6,000


 (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 accounts

is 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 .

Turramurra Furniture Company manufactures specialist furniture for use with computers .

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