Question

Required information The Foundational 15 (LO3-1, LO3-2, LO3-3, LO3-4] [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 $ 50,000 $ 30,800 $ 43,200 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 $12.00 per direct labor-hour was based on a cost formula that estimated $480,000 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, $696,000. b. Raw materials used in production, $655,400. All of of the raw materials were used as direct materials. c. The following costs were accrued for employee services: direct labor, $430,000; indirect labor, $150,000; selling and administrative salaries, $251,000. d. Incurred various selling and administrative expenses (e.g., advertising, sales travel costs, and finished goods warehousing), $411,000. e. Incurred various manufacturing overhead costs (e.g., depreciation, insurance, and utilities), $330,000. 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 $1,521,800 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 $3,255,000. The jobs cost $1,531,800 to manufacture according to their job cost sheets.

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

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

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

4. What is the journal entry to record the cost of goods sold referred to in item h above?

Record the cost of goods sold to the customer.

5. What is the ending balance in Finished Goods?

6. 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?

7. What is the gross margin for the year?

8. What is the net operating income for the year?

Answer 1

1) calculate ending balance of work in process

Work in process
Beg Bal	30800	1521800	Finished goods
Direct material	655400
Direct labor	430000
Overhead (41000*12)	492000
End Bal	86400

2) Applied overhead = 492000

Actual overhead = 150000+330000 = 480000

Over applied overhead = 12000

3) Cost of goods available for sale = 1521800+43200 = 1565000

4) Journal entry

No	General Journal	Debit	Credit
	Cost of goods sold	1531800
	Finished goods		1531800

5) Ending balance of finished goods

Finished goods
Beg Bal	43200	Cost of goods sold	1531800
WIP	1521800
End Bal	33200

6) Adjusted cost of goods sold = 1531800-12000 = 1519800

7) Gross margin = 3255000-1519800 = 1735200

8) Net operating income = 1735200-251000-411000 = 1073200