Question

1. What is the journal entry to record raw materials used in production?

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 $ 79,000 $ 25,600 $ 37,200 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 $12.25 per direct labor-hour was based on a cost formula that estimated $490,000 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, $690,000. b. Raw materials used in production, $660,000. All of of the raw materials were used as direct materials. c. The following costs were accrued for employee services: direct labor, $440,000; indirect labor, $150,000; selling and administrative salaries, $260,000. d. Incurred various selling and administrative expenses (e.g., advertising, sales travel costs, and finished goods warehousing), $462,000. e. Incurred various manufacturing overhead costs (e.g., depreciation, insurance, and utilities), $340,000. 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 $1,542,950 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 $3,172,500. The jobs cost $1,552,950 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?

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

Answer 1

Solution:

1.

Journal Entry

Work in process a/c Dr	660,000
To Raw materials a/c		660,000

2.

Ending balance in raw materials is

Raw materials

Beg bal.	79,000
a.	690,000	660,000	b
End bal. (690000 -660000+79000)	109,000

3.

Work in process a/c Dr	440,000
Manufacturing overhead a/c Dr	150,000
Selling and administrative salaries a/c Dr	260,000
To wages payable a/c		850,000

4.

Total manufacturing overhead applied = 41000 x 12.25 = 502,250

Actual direct labour hours = 41,000

Predetermined overhead rate = 12.25