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

Raw materials	$	59,500
Work in process	$	37,600
Finished goods	$	61,800

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 $14.25 per direct labor-hour was based on a cost formula that estimated $570,000 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, $634,000.

Raw materials use in production, $598,400. All of of the raw materials were used as direct materials.

The following costs were accrued for employee services: direct labor, $520,000; indirect labor, $150,000; selling and administrative salaries, $337,000.

Incurred various selling and administrative expenses (e.g., advertising, sales travel costs, and finished goods warehousing), $461,000.

Incurred various manufacturing overhead costs (e.g., depreciation, insurance, and utilities), $420,000.

Manufacturing overhead cost was applied to production. The company actually worked 41,000 direct labor-hours on all jobs during the year.

Jobs costing $1,645,750 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 $3,360,000. The jobs cost $1,655,750 to manufacture according to their job cost sheets.

6. What is the journal entry to record the transfer of completed jobs that is referred to in item g above? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

13. 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?​

14. What is the gross margin for the year?

15. What is the net operating income for the year?​

Answer 1

6.

Transaction	General Journal	Debit	Credit
g.	Finished goods inventory	1645750
	Work in process inventory		1645750
	(To record transfer of completed jobs to finished goods)

13. Adjusted cost of goods sold: $1641500

Manufacturing overheads incurred:
Indirect labor	150000
Depreciation, insurance, and utilities	420000
Total manufacturing overhead incurred $	570000
Manufacturing overheads applied $	584250
(41000 DLH x $14.25)
Manufacturing overheads overapplied $	14250
Adjusted cost of goods sold:
Unadjusted cost of goods sold $	1655750
Less: Manufacturing overheads overapplied	14250
Adjusted cost of goods sold $	1641500

14. Gross margin for the year: $1718500

Gross margin = Sales - Adjusted cost of goods sold = $3360000 - $1641500 = $1718500

15. Net operating income for the year: $920500

Sales		3360000
Cost of goods sold		1641500
Gross margin		1718500
Selling and administrative expense:
Selling and administrative salaries	337000
Advertising, sales travel costs, warehousing	461000	798000
Net operating income $		920500