Question: Pip Squeaks Inc. is a manufacturer of
Pip Squeaks Inc. is a manufacturer of furnishings for infants and children. The company uses a job order cost system. Pip Squeaks’ Work in Process Inventory on April 30, 2010, consisted of the following jobs: 
The company’s Finished Goods Inventory, carried on a FIFO (first-in, first-out) basis, consists of five items: 
Pip Squeaks applies factory overhead on the basis of direct labor hours. The company’s factory overhead budget for the fiscal year ending May 31, 2010, totaled $4,500,000, and the company planned to work 600,000 direct labor hours during this year. Through the first 11 months of the year, a total of 555,000 direct labor hours were worked, and total factory overhead amounted to $4,273,500. At the end of April, the balance in Pip Squeaks’ Raw Material Inventory account, which includes both raw material and purchased parts, was $668,000. Additions to and requisitions from the material inventory during May included the following: 
During May, Pip Squeaks’ factory payroll consisted of the following: 
The jobs that were completed in May and the unit sales for May are as follows: 
Items Quantity Shipped Cribs ………………………………………………………………17,500 Playpens ………………………………………………………..21,000 Strollers ……………………………………………………….14,000 Dressers ………………………………………………………18,000 Carriages ………………………………………………………6,000 a. Describe when it is appropriate for a company to use a job order costing system. b. Calculate the dollar balance in Pip Squeaks’ Work in Process Inventory account as of May 31, 2010. c. Calculate the dollar amount related to the playpens in Pip Squeaks’ Finished Goods Inventory as of May 31, 2010. d. Explain the treatment of underapplied or overapplied overhead when using a job order costing system.
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Job No. Items Units Accumulated Cost CBS102 Cribs 20,000 $ 900,000 PLP086 Playpens 15,000 420,000 DRS114 Dressers 25,000 1,570,000 Item Quantity and Unit Cost Total Cost 7,500 units x $64 $ 480,000 Cribs Strollers 13,000 units x $23 299,000 Carriages 11,200 units x $102 1,142,400 Dressers 21,000 units x $55 1,155,000 Playpens 19,400 units x $35 679,000 Total $3,755,400 Raw Material Parts Purchased Additions $242,000 $396,000 Requisitions: Job #CBS102 51,000 104,000 Job #PLP086 3,000 10,800 Job #DRS114 124,000 87,000 Job #STRO77 (10,000 strollers) 62,000 81,000 Job #CRG098 (5,000 carriages) 65,000 187,000 Job No. Hours Cost CBS102 12,000 $122,400 PLPO86 4,400 43,200 DRS114 19,500 200,500 STRO77 3,500 30,000 CRG098 14,000 138,000 Indirect 3,000 29,400 Supervision 57,600 Total $621,100 Job No. Items Quantity Completed CBS102 Cribs 20,000 PLP086 Playpens 15,000 STRO77 Strollers 10,000 CRG098 Carriages 5,000
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