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

Question:

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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