Question

Required information [The following information applies to the questions displayed below.) 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 $ 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, $510,000. b. Raw materials used 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 (e.g., 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. 14. What is the gross margin for the year? Gross margin

Answer 1

Solution 14:

Total manufacturing overhead incurred = $150,000 + $500,000 = $650,000

Manufacturing overhead applied = 41000*$16.25 = $666,250

Overapplied overhead = $666,250 - $650,000 = $16,250

Adjusted cost of goods sold = Unadjusted cost of goods sold - Overapplied overhead = $1,690,000 - $16,250 = $1,673,750

Gross margin = Sales revenue - Cost of goods sold = $2,800,000 - $1,673,750 = $1,126,250