Question

Bunnell Corporation is a manufacturer that uses job-order casting, On January 1, the company's inventory balances were as follows: R aterials Work in process Finished Foods $ 40.000 $18,000 $ 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: a. Raw materials were purchased on account, S510,000. b. Raw materials use in production, $480,000. All of of the raw materials were used as direct materials c. The following costs were accrued for employee services: direct labor, $600,000; indirect labor, $150,000; selling and administrative salaries, $240,000 d. Incurred various selling and administrative expenses (e.g., advertising, sales travel costs, and finished goods warehousing). $367,000. e. Incurred various manufacturing overhead costs (eg, depreciation, insurance, and utilities). $500,000 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 $1,680,000 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 $2,800,000. The jobs cost $1,690,000 to manufacture according to their job cost sheets. < Prey 15 of 15 Next

Answer 1

Applied overhead = 16.25*41000 = 666250

Actual overhead = 150000+500000 = 650000

Over applied overhead = 666250-650000 = 16250

Adjusted cost of goods sold = 1690000-16250 = 1673750

Gross profit = Sales-Cost of goods sold = 2800000-1673750 = 1126250

Selling and administrative expense = 240000+367000 = 607000

Net income = Gross profit-Selling and administrative expense = 1126250-607000 = 519250