Question

Bunnell Corporation is a manufacturer that uses job-order costing. On January 1, the company’s inventory balances were as follows:

Raw materials	$	40,000
Work in process	$	18,000
Finished goods	$	35,000

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 $16.25 per direct labor-hour was based on a cost formula that estimated $650,000 of total manufacturing overhead for an estimated activity level of 40,000 direct labor-hours. The following transactions were recorded for the year:

1. Raw materials were purchased on account, $510,000.
2. Raw materials use in production, $480,000. All of of the raw materials were used as direct materials.
3. The following costs were accrued for employee services: direct labor, $600,000; indirect labor, $150,000; selling and administrative salaries, $240,000.
4. Incurred various selling and administrative expenses (e.g., advertising, sales travel costs, and finished goods warehousing), $367,000.
5. Incurred various manufacturing overhead costs (e.g., depreciation, insurance, and utilities), $500,000.
6. Manufacturing overhead cost was applied to production. The company actually worked 41,000 direct labor-hours on all jobs during the year.
7. Jobs costing $1,680,000 to manufacture according to their job cost sheets were completed during the year.
8. Jobs were sold on account to customers during the year for a total of $2,800,000. The jobs cost $1,690,000 to manufacture according to their job cost sheets.

2. What is the ending balance in Raw Materials?

Answer 1

2
Raw materials, beginning balance	40000
Add: Raw materials purchased	510000
Less: Raw materials used in production	-480000
Ending balance in Raw Materials	70000