Question

Bunnell Corporation is a manufacturer that uses job-order costing. On January 1, the company's inventory balances were as follows: Raw materials$50,500 Work in process 25,000 Finished goods38,100 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 $11.75 per direct labor-hour was based on a cost formula that estimated $470,000 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, $592,000. b. Raw materials use in production, $557,000. All of of the raw materials were used as direct materials. c. The following costs were accrued for employee services: direct labor, $420,000; indirect labor, $150,000; selling and administrative salaries, $295,000. d. Incurred various selling and administrative expenses (e.g., advertising, sales travel costs, and finished goods warehousing), $381,000. e. Incurred various manufacturing overhead costs (e.g., depreciation, insurance, and utilities), $320,000. 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 $1,399,450 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 $2,925,000. The jobs cost $1,409,450 to manufacture according to their job cost sheets.

Answer 1

13	Actual Manufacturing overhead cost
	Indirect Labour	$150,000
	Manufacturing overhead cost	$320,000
	Total	$470,000
	Applied Manufacturing overhead cost
	Direct labour hours	41,000
	Predetermined overhead rate	$11.75
	Applied Manufacturing overhead cost	$481,750
	Over-applied manufacturing overheads
	Applied manufacturing overhead	$481,750
	Actual manufacturing overhead	$470,000
	Over-applied	$11,750
	Cost of goods sold	$1,409,450
	Less: Over applied manufacturing overhead	($11,750)
	Adjusted cost of goods sold	$1,397,700

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