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 $ 72,500 $ 18, 200 $ 46,500 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 $15.50 per direct labor-hour was based on a cost formula that estimated $620,000 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, $628,000. b. Raw materials use in production, $598,000. All of of the raw materials were used as direct materials. c. The following costs were accrued for employee services: direct labor, $570,000; indirect labor, $150,000; selling and administrative salaries, $266,000. d. Incurred various selling and administrative expenses (e.g., advertising, sales travel costs, and finished goods warehousing), $418,000. e. Incurred various manufacturing overhead costs (e.g., depreciation, insurance, and utilities), $470,000. f. Manufacturing overhead cost was applied to production. The company actually worked 41,000 direct labor-hours on all jobs during the year. g. Jobs costing $1,717,900 to manufacture according to their job cost sheets were completed during the year. h. Jobs were sold on account to customers during the year for a total of $3,225,000. The jobs cost $1,727,900 to manufacture according to their job cost sheets.

Answer 1

7) Work in process:
DEBIT	AMOUNT $	CREDIT	AMOUNT $
OB	18200	FG	1717900
DM	598000	CB	103800
DL	570000
M OH (41000*15.5)	635500
TOTAL	1821700	TOTAL	1821700
Ending balance in WIP = $103800
8) Actual manufacturing overhead cost:
Ind Labor	150000
Other expenses	470000
total	620000
9) Over-applied overhead = Applied overhead - Actual overhead
635500 = 620000 = $15500
12) Finished Goods Inventory :
DEBIT	AMOUNT $	CREDIT	AMOUNT $
OB	46500	COGS	1727900
WIP	1717900	CB	36500
TOTAL	1764400	TOTAL	1764400
Ending balance in FG = $36500
13) Adjusted Cost of goods sold = COGS - Over-applied overhead
1727900 - 15500 = $1712400
15)Net Operating Income:
Sales	3225000
Less:Adj COGS	1712400
Gross Profit	1512600
Less:Expenses:
Salaries	266000
Selling and Admin exp.	418000
total expenses	684000
Net Operating Income	828600