Question

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

Raw materials	$	74,000
Work in process	$	31,800
Finished goods	$	52,200

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 $14.50 per direct labor-hour was based on a cost formula that estimated $580,000 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, $690,000.
2. Raw materials use in production, $641,800. All of of the raw materials were used as direct materials.
3. The following costs were accrued for employee services: direct labor, $530,000; indirect labor, $150,000; selling and administrative salaries, $308,000.
4. Incurred various selling and administrative expenses (e.g., advertising, sales travel costs, and finished goods warehousing), $457,000.
5. Incurred various manufacturing overhead costs (e.g., depreciation, insurance, and utilities), $430,000.
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 $1,703,300 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 $3,510,000. The jobs cost $1,713,300 to manufacture according to their job cost sheets.

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

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

3. What is the ending balance in Finished Goods?

4. 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

SCHEDULE OF COST OF GOODS MANUFACTURED
Direct materials:
Raw materials inventory, beginning	74000
Add: Purchases of raw materials	690000
Raw materials available	764000
Deduct: Raw materials inventory, ending [641800-764000]	122200
Raw materials used in production		641800
Direct labor		530000
Mfg overhead applied = 41000*14.50 =		594500
Manufacturing costs incurred during the period		1766300
Add: WIP, beginning		31800
Total manufacturing costs		1798100
Deduct: WIP, ending [1703300-1798100]		94800
Cost of goods manufactured		1703300
COST OF GOODS SOLD
Finished goods inventory, beginning	52200
Add: Cost of goods manufatured	1703300
Goods available for sale	1755500
Deduct: Finished goods inventory, ending [1755500-1713300]	42200
Cost of goods sold (Unadjusted)	1713300
ANSWERS:
Cost of goods available for sale	1755500
Cost of goods sold	1713300
WIP inventory		1713300
Ending balance in finished goods	42200
Actual overhead:
Indirect labor	150000
Other manufacturing overheads	430000
Total overhead incurred	580000
Overhead applied	594500
Overhead over applied = 594500-580000 =	14500
Adjusted cost of goods sold	1713300