Question

Required information [The following information applies to the questions displayed below.) 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 $ 63,500 $ 32,000 $ 36,000 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 $13.00 per direct labor-hour was based on a cost formula that estimated $520,000 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, $584,000. b. Raw materials use in production, $537,600. All of of the raw materials were used as direct materials. c. The following costs were accrued for employee services: direct labor, $470,000; indirect labor, $150,000; selling and administrative salaries, $249,000. d. Incurred various selling and administrative expenses (e.g., advertising, sales travel costs, and finished goods warehousing), $464,000. e. Incurred various manufacturing overhead costs (e.g., depreciation, insurance, and utilities), $370.000. f. Manufacturing overhead cost was applied to production. The company actually worked 41,000 direct labor-hours on all jobs during the year. g. Jobs costing $1,478,700 to manufacture according to their job cost sheets were completed during the year. h. Jobs were sold on account to customers during the year for a total of $3,367,500. The jobs cost $1,488,700 to manufacture according to their job cost sheets.

Answer 1

12) Finished goods

Beg bal	36000	Cost of goods sold	1488700
Cost of goods manufactured	1478700
End bal	26000

13) Applied overhead = 41000*13 = 533000

Actual overhead = 150000+370000 = 520000

Over applied overhead = 13000

Adjusted cost of goods sold = 1488700-13000 = 1475700

14) Gross margin = 3367500-1475700 = 1891800

15) Net operating income = 1891800-249000-464000 = 1178800