Question

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

Raw materials	$	77,500
Work in process	$	32,800
Finished goods	$	34,800

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 $12.75 per direct labor-hour was based on a cost formula that estimated $510,000 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, $654,000.
2. Raw materials use in production, $618,800. All of of the raw materials were used as direct materials.
3. The following costs were accrued for employee services: direct labor, $460,000; indirect labor, $150,000; selling and administrative salaries, $270,000.
4. Incurred various selling and administrative expenses (e.g., advertising, sales travel costs, and finished goods warehousing), $417,000.
5. Incurred various manufacturing overhead costs (e.g., depreciation, insurance, and utilities), $360,000.
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 $1,539,250 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 $3,172,500. The jobs cost $1,549,250 to manufacture according to their job cost sheets.

Required :

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

7. What is the ending balance in Work in Process?

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

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

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

Answer 1

6)
Date	Account Titles and explanation	Debit ($)	Credit ($)
	Finished goods inventory	1539250
	Work in process inventory		1539250
	(To record the transfer of completed jobs)
7)	Particulars	Amount ($)	Amount ($)
	Beginning work-in-process		32800
	Raw Material Used	6,18,800
	Direct Labor	4,60,000
	Manufacturing Overhead Applied (12.75*41,000)	5,22,750	16,01,550
			16,34,350
	Less: Finished goods inventory		-1539250
	Ending balance in work-in-process		95,100
8)	Particulars	Amount ($)
	Indirect Labor	1,50,000
	Depreciation, Insurance, Utilities, etc.	3,60,000
	Total Actual Manufacturing Overhead Cost	5,10,000
9)
	Overheads applied = 12.75*41,000 = $522,750
	Actual manufacturing overhead = 510,000
	As the overhead applied is more than the actual manufacturing overhead,
	the overheads are overapplied.
	Overheads overapplied = 522,750 - 510,000 = 12,750
10)	Particulars	Amount ($)
	Beginning finished goods inventory	34,800
	Add: Cost of goods manufactured	1539250
	Cost of goods available for sale	15,74,050