Question

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

Raw materials	$	40,000
Work in process	$	18,000
Finished goods	$	35,000

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 $16.25 per direct labor-hour was based on a cost formula that estimated $650,000 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, $510,000.
2. Raw materials use in production, $480,000. All of of the raw materials were used as direct materials.
3. The following costs were accrued for employee services: direct labor, $600,000; indirect labor, $150,000; selling and administrative salaries, $240,000.
4. Incurred various selling and administrative expenses (e.g., advertising, sales travel costs, and finished goods warehousing), $367,000.
5. Incurred various manufacturing overhead costs (e.g., depreciation, insurance, and utilities), $500,000.
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 $1,680,000 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 $2,800,000. The jobs cost $1,690,000 to manufacture according to their job cost sheets.

Q1. What is the total amount of manufacturing overhead applied to production during the year?

Q2. Record the maufactured goods completed during the year.

Q3. What is the ending balance in work in progress?

Q4. Record the cost of goods sold to the customer

Q5. What is the ending balance in finished goods?

Q6. 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?

Q7. What is the gross margin for the year?

Q8.What is the net operating income for the year?

Q9. What is the journal entry to record raw materials used in production? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Q4. Is manufacturing overhead underapplied or overapplied for the year? By how much?

Q5. What is the cost of goods available for sale during the year?

Q6.

Answer 1

Q1.The total amount of manufacturing overhead applied to production during the year:-Manufacturing overhead applied= 41,000 hours * $16.25= $666,250

Q2. No info available to calculate goods manufactured during the year

Q3.

The ending balance in Work in Process:-

Work in Process

Beg. Bal.	$18,000
Add: RM	$480,000
OH	$666,250
LABOUR	$600,000
Less: completed during the year	($1,680,000)
End Bal.	$84,250

Q4. Cost of goods sold to customers = 1,690,000

Q5.

The ending balance in Finished Goods

Finished goods

Beg.bal	$35,000
Add : During the year	$1,680,000
Less: Job costs according to job sheets	$1,690,000
End. Bal.	$25,000

Q6.

the adjusted cost of goods sold for the year

Cost of goods sold	$1,690,000
Less:Manufacturing overhead	$16,250
The cost of goods sold for the year	$1,673,750

Q7.

the gross margin for the year

Sales	$2,800,000
Less:COGS	-$1,673,750
Gross Profit	$1,126,250

Gross margin =( $1,126,250 ÷ $ 2,800,000)*100

= 40.32%

Q8.

The net operating income for the year:-

Gross Profit	$1,126,250
Less:Selling and Administrative Salaries	$240,000
Less: Selling and Administrative Expenses	$367,000
Net operating income	$519,250

Q9.

Journal entry to record raw material used in production

Date	Account Title and Explanation	Debit ($)	Credit ($)
1	Work in process	480,000
	Raw Materials		480,000
	(To record raw materials used in production)

Q4.

Manufacturing overheads are overapplied for the year

Overapplied manufacturing overhead= ($666,250-$650,000)= $16,250

Q5.

cost of goods available for sale during the year:-

Beg.Bal	$35,000
Add: Cost of goods manufactured	$1,680,000
cost of goods available for sale	$1,715,000