Question

Bunnell Corporation is a manufacturer that uses job-order costing. On January 1, the company's inventory balances were as follows: Raw materials Work in process Finished goods $ 59,500 $ 37,600 $ 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: a. Raw materials were purchased on account, $634,000. b. Raw materials used in production, $598,400. All of of the raw materials were used as direct materials. c. The following costs were accrued for employee services: direct labor, $520,000; indirect labor, $150,000; selling and administrative salaries, $337,000. d. Incurred various selling and administrative expenses (e.g., advertising, sales travel costs, and finished goods warehousing), $461,000. e. Incurred various manufacturing overhead costs (e.g., depreciation, insurance, and utilities), $420,000. f. Manufacturing overhead cost was applied to production. The company actually worked 41,000 direct labor-hours on all jobs during the year.

Answer 1

1)	Transaction	General Journal					Debit	Credit
	b.	Work in process inventory					598,400
		Raw materials inventory						598,400
2)	Ending balance in Raw Materials
	Raw materials
	Beg.bal	59,500
	a.	634,000	598,400	b.
	End bal	95,100
3)	Transaction	General Journal					Debit	Credit
	c.	Work in process inventory					520,000
		Manufacturing overhead					150,000
		Selling & administrative salaries					337,000
		Factory wages payable						1,007,000
4)	Manufacturing overhead applied ($11.75*41,000 DLH's)			(41000*14.15)			580150	answer
5)	Total manufacturing cost added during the year
	Direct materials				598,400
	Direct labor				520,000
	overhead applied				580,150
	Total.				1,698,550
	total manufacturing cost				1,698,550	answer
6)	Transaction	General Journal					Debit	Credit
	g.	Finished goods inventory					1,645,750
		Work in process inventory						1,645,750
7)	Work in process
	Beg.bal	37,600	1,645,750	g.
	b.	598,400
	c.	520,000
	f.	580,150
	End bal	90,400
8)	total actual manufacturing overhead cost					570,000	answer
	indirect labor			150000
	Various manfuacturing cost			420,000
	total			570000
9)	overapplied overhead			10,150	answer
10)	Cost of goods available for sale				1,707,550	answer
	(61800+1,645,750)
11)	Transaction	General Journal					Debit	Credit
	h.	cost of good sold					1,655,750
		Finished goods inventory						1,655,750
12)	Finished goods	Finished Goods
	Beg.bal	61,800
	g.	1,645,750	1,655,750	h.
	End bal	51,800
13)	Adjusted cost of goods sold				1,645,600
	(1,655,750-10,150)
14)	Gross margin				1,714,400
	(sales - adjusted cost of goods sold)
15)	Net operating income				916,400	answer
	Gross margin			1,714,400
	less
	Selling & adm salaries			-337,000
	Various selling & adm			-461,000
	Net operating income			916,400