Question

[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	$	60,500
Work in process	$	20,800
Finished goods	$	57,600

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 $11.25 per direct labor-hour was based on a cost formula that estimated $450,000 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, $622,000.
2. Raw materials used in production, $591,800. All of of the raw materials were used as direct materials.
3. The following costs were accrued for employee services: direct labor, $400,000; indirect labor, $150,000; selling and administrative salaries, $280,000.
4. Incurred various selling and administrative expenses (e.g., advertising, sales travel costs, and finished goods warehousing), $400,000.
5. Incurred various manufacturing overhead costs (e.g., depreciation, insurance, and utilities), $300,000.
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 $1,360,750 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 $3,330,000. The jobs cost $1,370,750 to manufacture according to their job cost sheets.

7. What is the ending balance in Work in Process?

13. Assuming that the company closes its underapplied or overapplied overhead to Cost of Goods Sold, what is the adjusted cost of goods sold for the year?

Answer 1

7) Ending work in process

Beginning WIP	20800
Direct material	591800
Direct labor	400000
Overhead (41000*11.25)	461250
Less: Cost of goods manufactured	-1360750
Ending WIP	113100

8) Actual overhead = 150000+300000 = 450000

Applied overhead = 461250

Over applied overhead = 461250-450000 = 11250

Adjusted cost of goods sold = 1370750-11250 = 1359500