Kirti runs a small business that makes furniture on order for customers. Customers place orders online or in person and the business then makes the furniture and delivers it to the customers’ home. Each order is different from the other orders received by the company because customers can customise their furniture. In order to keep track of costs, she uses a job order costing system in the business. The January 2020 data on costs were as follows:

Raw material purchased on credit                                          460,000

Direct labour costs                                                               480,000

Raw materials used to produce furniture                                440,000

Actual factory overhead costs                                                390,000

Cost of goods manufactured                                                  1,000,000

Sales (credit sales)                                                                 1,300,000

 

Machine hours for January 2020 were 52,500 hours, and the business applies factory overhead to production at a rate of $5.00 per machine hour. The beginning raw materials inventory was $45,000. The beginning work in process inventory was $69,000. The beginning and ending finished goods inventories were $97,000 and $137,000 respectively.

Evaluate whether job order costing system is the most appropriate costing system for Kirti’s business. 

Answer rating: 100% (QA)

Income Statement Description Amount Amount Sales Revenue 1300000 Less Cost of Goods Sold Cost of Goo... View the full answer