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[The following information applies to the questions displayed below.] Bunnell Corporation is a manufacturer that uses jo...

[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 $ 66,000
Work in process $ 33,600
Finished goods $ 38,400

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 $13.50 per direct labor-hour was based on a cost formula that estimated $540,000 of total manufacturing overhead for an estimated activity level of 40,000 direct labor-hours. The following transactions were recorded for the year:

  1. Raw materials were purchased on account, $684,000.
  2. Raw materials use in production, $646,400. All of of the raw materials were used as direct materials.
  3. The following costs were accrued for employee services: direct labor, $490,000; indirect labor, $150,000; selling and administrative salaries, $319,000.
  4. Incurred various selling and administrative expenses (e.g., advertising, sales travel costs, and finished goods warehousing), $423,000.
  5. Incurred various manufacturing overhead costs (e.g., depreciation, insurance, and utilities), $390,000.
  6. Manufacturing overhead cost was applied to production. The company actually worked 41,000 direct labor-hours on all jobs during the year.
  7. Jobs costing $1,623,300 to manufacture according to their job cost sheets were completed during the year.
  8. Jobs were sold on account to customers during the year for a total of $3,547,500. The jobs cost $1,633,300 to manufacture according to their job cost sheets

12. What is the ending balance in Finished Goods?

13. 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?

14. What is the gross margin for the year?

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

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ReportAnswer #1
1) Transaction                    General Journal                                       Debit Credit
b. Work in process inventory 646,400
Raw materials inventory 646,400
2) Ending balance in Raw Materials
                                  Raw materials
Beg.bal 66,000
a. 684,000 646,400 b.
End bal 103,600
3) Transaction                    General Journal                                       Debit Credit
c. Work in process inventory 490,000
Manufacturing overhead 150,000
Selling & administrative salaries 319,000
Factory wages payable 959,000
4) Manufacturing overhead applied (41000*13.50) 553500 answer
5) Total manufacturing cost added during the year
Direct materials 646,400
Direct labor 490,000
overhead applied 553,500
Total. 1,689,900
total manufacturing cost 1,689,900 answer
6) Transaction                    General Journal                                       Debit Credit
g. Finished goods inventory 1,623,300
Work in process inventory 1,623,300
7)                       Work in process
Beg.bal 33,600 1,623,300 g.
b. 646,400           
c. 490,000
f. 553,500
End bal 100,200
8) total actual manufacturing overhead cost 540,000 answer
indirect labor 150000
Various manfuacturing cost 390,000
total 540000
9) overapplied overhead 13,500 answer
10) Cost of goods available for sale 1,661,700 answer
(38400+1,623,300)
11) Transaction                    General Journal                                       Debit Credit
h. cost of good sold 1,690,000
Finished goods inventory 1,690,000
12)                           Finished goods Finished Goods           
Beg.bal 38,400
g. 1,623,300 1,633,300 h.
End bal 28,400
13) Adjusted cost of goods sold 1,619,800
(1,633,300-13500)
14) Gross margin 1,927,700
(sales - adjusted cost of goods sold)
15) Net operating income 1,185,700 answer
Gross margin 1,927,700
less
Selling & adm salaries -319,000
Various selling & adm -423,000
Net operating income 1,185,700
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