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: Raw materials were purchased on account, $510,000. Raw materials use in production, $480,000. All of of the raw materials were used as direct materials. The following costs were accrued for employee services: direct labor, $600,000; indirect labor, $150,000; selling and administrative salaries, $240,000. Incurred various selling and administrative expenses (e.g., advertising, sales travel costs, and finished goods warehousing), $367,000. Incurred various manufacturing overhead costs (e.g., depreciation, insurance, and utilities), $500,000. Manufacturing overhead cost was applied to production. The company actually worked 41,000 direct labor-hours on all jobs during the year. Jobs costing $1,680,000 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 $2,800,000. The jobs cost $1,690,000 to manufacture according to their job cost sheets.

2. What is the ending balance in Raw Materials?

3. What is the journal entry to record the labor costs incurred during the year? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

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

5. What is the total manufacturing cost added to Work in Process during the year?

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.)

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?

11. What is the journal entry to record the cost of goods sold referred to in item h above? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

12. What is the ending balance in Finished Goods?

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

Answer-1-Journal Entry:-

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

2-the ending balance in Raw Materials:-

Raw Materials
Beginning Balance	$40,000
Add: Purchases	+510,000
Less: Raw materials used in production	-480,000
Ending Balance	$70,000

3-the journal entry to record the labor costs incurred during the year

Date	Account Title and Explanation	Debit ($)	Credit ($)
1	Salaries and Administrative salaries	240,000
	Manufacturing Overhead	150,000
	Work in process	600,000
	Wages Payable		990,000
	(To record labor cost incurred)

4-the total amount of manufacturing overhead applied to production during the year:-

Manufacturing overhead applied= 41,000 hours * $16.25= $666,250

5-the total manufacturing cost added to Work in Process during the year:-

Raw Materials	$480,000
Direct Labor	600,000
Manufacturing Overhead	666,250
Cost added to WIP	$1,746,250

6-the journal entry to record the transfer of completed jobs that is referred to in item g

Date	Account Title and Explanation	Debit ($)	Credit ($)
1	Finished goods	1,680,000
	Work in Process		1,680,000
	(To record the transfer of completed jobs)

7- The ending balance in Work in Process:-

Work in Process

Beg. Bal.	$18,000
b	$480,000
f	$666,250
c	$600,000	$1,680,000	g
End Bal.	$84,250

8-the total amount of actual manufacturing overhead cost incurred during the year= $650,000

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

10-the 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

11-the journal entry to record the cost of goods sold referred to in item h above:

Date	Account Title and Explanation	Debit ($)	Credit ($)
1	Cost of goods sold	1,690,000
	Finished Goods		1,690,000
	(To record the transfer of cost of goods sold)

12-the ending balance in Finished Goods

Finished goods

Beg.bal	$35,000
(g)	1,680,000
		$1,690,000	(h)
End. Bal.	$25,000

13- 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

14- the gross margin for the year

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

15-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

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