Information:

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

• Raw materials$63,500
• Work in process$32,000
• Finished goods$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:

• Raw materials were purchased on account, $584,000.
• Raw materials use in production, $537,600. All of of the raw materials were used as direct materials.
• The following costs were accrued for employee services: direct labor, $470,000; indirect labor, $150,000; selling and administrative salaries, $249,000.
• Incurred various selling and administrative expenses (e.g., advertising, sales travel costs, and finished goods warehousing), $464,000.
• Incurred various manufacturing overhead costs (e.g., depreciation, insurance, and utilities), $370,000.
• Manufacturing overhead cost was applied to production. The company actually worked 41,000 direct labor-hours on all jobs during the year.
• Jobs costing $1,478,700 to manufacture according to their job cost sheets were completed during the year.
• 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.

Additional Information I have calculated:

• Ending Balance of Raw Material: 109,900
• Manufacturing overhead applied to production during the year: 533,000
• Ending Balance of Work in Process: 93,900
• Manufacturing overhead over applied for the year by: 13,000
• Ending Balance of Finished Goods: 26,000

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Questions:

1. What is the journal entry to record the transfer of completed jobs that is referred to in item g above?

Answer: Finished goods inventory $ 1,478,700

WIP inventory $ 1,478,700

2. What is the total manufacturing cost added to Work in Process during the year?

Direct materials used $ 537,600

Direct labor cost $ 470,000

Applied overhead: $13 per direct labor hour * 41000 $ 533,000

Total manufacturing costs $ 1,540,600

Total manufacturing costs added to WIP =$ 1,540,600

Total manufacturing overhead applied added to WIP =$ 533,000

3. What is the total amount of actual manufacturing overhead cost incurred during the year?

Indirect labor $ 150,000

Other man. Overhead costs $ 370,000

Total man. Overhead cost incurred $ 520,000

4. What is the cost of goods available for sale during the year?

Direct materials used $ 537,600

Direct labor cost $ 470,000

Applied overhead: $13 per direct labor hour * 41000 $ 533,000

Total manufacturing costs $ 1,540,600

Add: Beginning WIP inventory $32,000 $ 1,572,600

Less: Ending WIP inventory* $ (93,900)

Total cost of goods manufactured $ 1,478,700

Add: Beginning finished goods inventory $36,000

Cost of goods available for sale$ 1,514,700

5. What is the journal entry to record the cost of goods sold referred to in item h above?

Cost of goods sold $ 1,488,700

Finished goods inventory $ 1,488,700

6. 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?

The overhead of $13000 is OVER-applied as the applied overhead

This overapplied overhead will be deducted from the cost of goods sold.

Cost of goods sold (before adjustment) $ 1,488,700

Less: Overhead over-applied $ (13,000)

Adjusted cost of goods sold $ 1,475,700

7. What is the gross margin for the year?

Sales revenue $ 3,367,500

Less: Adjusted cost of goods sold $ (1,475,700)

Gross margin$ 1,891,800

8. What is the net operating income for the year?

Gross margin$ 1,891,800

Less: Salaries expense$ 249,000

Selling & admin. Exp $ 464,000+ $ 713,000

Net operating income $ 1,178,800

Answered questions BC2530 Week 1 Assignment.

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