Question

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

Raw materials	$	61,500
Work in process	$	32,400
Finished goods	$	42,900

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 $13.75 per direct labor-hour was based on a cost formula that estimated $550,000 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, $514,000.
2. Raw materials use in production, $468,200. All of of the raw materials were used as direct materials.
3. The following costs were accrued for employee services: direct labor, $500,000; indirect labor, $150,000; selling and administrative salaries, $309,000.
4. Incurred various selling and administrative expenses (e.g., advertising, sales travel costs, and finished goods warehousing), $449,000.
5. Incurred various manufacturing overhead costs (e.g., depreciation, insurance, and utilities), $400,000.
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 $1,459,350 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 $2,985,000. The jobs cost $1,469,350 to manufacture according to their job cost sheets.

rev: 09_28_2018_QC_CS-140681

1. What is the ending balance in Raw Materials?

2.) Record the accrued labor costs

3.) What is the total amount of manufacturing overhead applied to production during the year?

4.) Record the manufactured goods completed during this year

Answer 1

1) Ending balance of raw material = Beginning raw material+raw material purchase-Ending raw material

= 61500+514000-468200

Ending balance of raw material = 107300

2) Journal entry

Date	account and explanation	Debit	Credit
	Work in process	500000
	Manufacturing overhead	150000
	Selling and administrative expense	309000
	Wages payable		959000

3) Total manufacturing overhead applied = 41000*13.75 = 563750

4) Journal entry

Date	account and explanation	Debit	Credit
	Finished goods	1459350
	Work in process		1459350