Question

Bunnell Corporation is a manufacturer that uses job-order costing. On January 1, the company's inventory balances were as follows: Raw materials Work in process Finished goods $ 59,500 $ 37,600 $ 61,800 The company applies overhead cost to jobs on the basis of direct labor-hours. For the current year, the company's predetermined overhead rate of $14.25 per direct labor-hour was based on a cost formula that estimated $570,000 of total manufacturing overhead for an estimated activity level of 40,000 direct labor-hours. The following transactions were recorded for the year: a. Raw materials were purchased on account, $634,000. b. Raw materials used in production, $598,400. All of of the raw materials were used as direct materials. c. The following costs were accrued for employee services: direct labor, $520,000; indirect labor, $150,000; selling and administrative salaries, $337,000. d. Incurred various selling and administrative expenses (e.g., advertising, sales travel costs, and finished goods warehousing), $461,000. e. Incurred various manufacturing overhead costs (e.g., depreciation, insurance, and utilities), $420,000. f. Manufacturing overhead cost was applied to production. The company actually worked 41,000 direct labor-hours on all jobs during the year.

Answer 1

12)	Finished goods	Finished Goods
	Beg.bal	61,800
	g.	1,645,750	1,655,750	h.
	End bal	51,800
13)	Adjusted cost of goods sold				1,645,600
	(1,655,750-10,150)
14)	Gross margin				1,714,400
	(sales - adjusted cost of goods sold)
15)	Net operating income				916,400	answer
	Gross margin			1,714,400
	less
	Selling & adm salaries			-337,000
	Various selling & adm			-461,000
	Net operating income			916,400