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 $ 63,500 $ 32,000 $ 36,000 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 $13.00 per direct labor-hour was based on a cost formula that estimated $520,000 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, $584,000. b. Raw materials used in production, $537,600. All of of the raw materials were used as direct materials. c. The following costs were accrued for employee services: direct labor, $470,000; indirect labor, $150,000; selling and administrative salaries, $249,000. d. Incurred various selling and administrative expenses (e.g., advertising, sales travel costs, and finished goods warehousing). $464,000. e. Incurred various manufacturing overhead costs (e.g., depreciation, insurance, and utilities). $370,000. 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 $1.478,700 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 $3,367,500. The jobs cost $1,488,700 to manufacture according to their job cost sheets.

14. what is the gross margin of the year

15. what is the net operating income for the year

Answer 1

Solution:

9.

Overapplied overhead

13,000

10

Cost of goods available for sale

1,514,700

11

Transaction	General Journal	Debit	Credit
1	Cost of goods sold a/c Dr	1,488,700
	To Finished goods a/c		1,488,700
	(Record the cost of goods sold to the customer)

12

Finished goods

Beg. Bal.	36,000
g	1,478,700
		1,488,700	h
End Bal.	26,000

13.

Adjusted cost of goods sold

1,475,700

14.

Gross margin

1,891,800

15

Net operating Income

1,178,800

Explanation:

9.

Manufacturing overhead applied = 41000 x 13 = 533,000

actual manufacturing overhead = 150,000 + 370,000 = 520,000

Overapplied overhead = 533,000 - 520,000 = 13,000

10

Begining balance finished goods + cost of goods manufactured = 36000 + 1478700 = 1,514,700

13

Adjusted cost of goods sold

Cost of goods sold	1,488,700
Less: Manufacturing overhead	13,000
Adjusted cost of goods sold (1488700 - 13000)	1,475,700

14.

Gross margin

sale	3,367,500
Less: COGS	1,475,700
Gross profit (3367500 -1475700)	1,891,800

15

Gross profit	1,891,800
Less:
Selling and admin
Salaries	249,000
Expenses	464,000
Net operating Income(1891800 - 249000 - 464000)	1,178,800