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. 8. What is the total amount of actual manufacturing overhead cost incurred during the year?

Answer 1

2. Ending Raw materials = Beginning raw materials + Raw materials purchased - raw materials used in production

=72500+ 628000- 598000= 102500

4. Manufacturing overhead applied to production = predetermined overhead rate * actual direct labor hours worked

=15.50*41,000=635500

5. Total manufacturing cost = Raw materials used + Direct labor + manufacturing overhead applied

= 598,000+ 570,000+ 635,500=1803500

8. Actual manufacturing overhead= Indirect labor + Depreciation, insurance, utilities etc = 150,000+ 470,000= 620,000

9. Manufacturing overhead under applied or over applied

a.Total manufacturing overhead applied =635500

b. Actual manufacturing overhead =620,000

Difference is (a-b)= 15,500

Manufacturing Overhead over applied 15,500

Because applied overhead is more than actual Overhead.