Question

Help Save & Exit Check m 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 $ 61,500 $ 32,400 $ 42,900 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 $13.75 per direct labor-hour was based on a cost formula that estimated $550,000 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. $514 000. b. Raw materials used in production, $468,200. All of of the raw materials were used as direct materials. c. The following costs were accrued for employee services: direct labor $500,000 indirect labor $150,000, seling and administrative salaries, $309,000. d. Incurred various selling and administrative expenses (eg. advertising, sales travel costs, and finished goods warehousing), $449,000. e. Incurred various manufacturing overhead costs (e.g., depreciation insurance and utilities), $400,000 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 $1,459,350 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 $2.985.000. The jobs cost $1,469,350 to manufacture according to their job cost sheets CR 15 1 2 3 Prev of 17 ! Next >

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Answer 1

1)

Transaction	General Journal	Debit	Credit
1.	Work in process inventory	$468200
	Raw materials inventory		$468200
	(To record raw materials used in production)

2)

Raw Materials
Beg. Bal.	$61500
a.	514000	468200	b.
End. Bal.	$107300

3)

Transaction	General Journal	Debit	Credit
1.	Work in process inventory	$500000
	Manufacturing overhead	$150000
	Selling and administrative salaries expense	$309000
	Salaries and wages payable		$959000
	(To record labor costs incurred)

4) Manufacturing overhead applied= Actual direct labor hours*Predetermined overhead rate

= 41000*$13.75= $563750

Manufacturing overhead applied

$563750

5) Total manufacturing cost= Direct materials+Direct labor+Manufacturing overhead applied

= $468200+500000+563750= $1531950

Total manufacturing cost

$1531950

6)

Transaction	General Journal	Debit	Credit
1.	Finished goods inventory	$1459350
	Work in process inventory		$1459350
	(To record cost of jobs completed)

7)

Work in Process
Beg. Bal.	$32400
b.	468200	$1459350	g.
c.	500000
f.	563750
End. Bal.	$105000

8) Actual manufacturing overhead cost= Indirect labor+Various manufacturing overhead costs

= $150000+400000= $550000

Total actual manufacturing overhead cost

$550000

9) Underapplied or overapplied overhead= Manufacturing overhead applied-Actual manufacturing overhead cost

= $563750-550000= $13750 overapplied

Overapplied overhead

$13750

10) Cost of goods available for sale= Beginning finished goods inventory+Cost of goods manufactured

= $42900+1459350= $1502250

Cost of goods available for sale

$1502250

11)

Transaction	General Journal	Debit	Credit
1.	Cost of goods sold	$1469350
	Finished goods inventory		$1469350
	(To record cost of goods sold)

12)

Finished Goods
Beg. Bal.	$42900
g.	1459350	1469350	h.
End. Bal.	$32900

13) Adjusted cost of goods sold= Unadjusted cost of goods sold-Overapplied overhead

= $1469350-13750= $1455600

Adjusted cost of goods sold

$1455600

14) Gross margin= Sales-Adjusted cost of goods sold

= $2985000-1455600= $1529400

Gross margin

$1529400

15) Selling and administrative expense= $309000+449000= $758000

Net operating income= Gross margin-Selling and administrative expense

= $1529400-758000= $771400

Net operating income

$771400

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