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Turramurra Furniture Company manufactures specialist furniture for use with computers .It uses a FIFO costing system...

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 2018 to 30 June 2019 .
The Work in Process Inventory on 31 May 2019 consisted of the following :
Job No.       Description                                    Units                       Accumulated Cost
SE523          Storage Equipment                      20,000                   $ 900,000
PS612          Printer Stand                                 25,000                       250,000
CH421         Chair                                               15,000                        431,000
Total                                                                                                   $1,581,000

The Finished Goods Inventory at 31 May 2019 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 2019 the balance in Turramurra Furniture Company ‘s Material Inventory Account
was $668,000 .Purchases of Material Inventory during June were $638,000.
The Raw Material requisitioned for jobs during June were as follows:
Job No.                                         $
SE523                                        155,000
PS612                                        211,000
CH421                                        13,800
DS174(5000 desks)                 252,000

Turramurra Furniture Company applies manufacturing overhead on the basis of machine hours.The manufacturing overhead budget for the year totalled $4,500,000 and the company budgeted it would be using 900,000 machine hours .From July 2018 to the end of May 2019 the company has used 830,000 machine hours and its actual manufacturing overhead has amounted to $4,122,000.

During the month of June 2019 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 2019 and the unit sales during June 2019 were as follows:
Job No           Description                     Quantity completed            Unit sales
SES523         Storage Equipment          19,000                                  17,500
PS612           Printer Stand                          0                                       18,000
CH421          Chairs                                  14,000                                  21,000
DS174           Desks                                     5,000                                    6,000

Required:
(a) Outline two different treatments for the over or underapplied overhead balances when using a job order costing system.
( b)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?
(c) 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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ekkarill92 answered 1 year ago
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