Bunnell Corporation is a manufacturer that uses job-order costing. On January 1,
ID: 2397304 • Letter: B
Question
Bunnell Corporation is a manufacturer that uses job-order costing. On January 1, the company’s inventory balances were as follows:
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 $13.25 per direct labor-hour was based on a cost formula that estimated $530,000 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, $708,000.
b. Raw materials use in production, $666,400. All of of the raw materials were used as direct materials.
c. The following costs were accrued for employee services: direct labor, $480,000; indirect labor, $150,000; selling and administrative salaries, $335,000.
d. Incurred various selling and administrative expenses (e.g., advertising, sales travel costs, and finished goods warehousing), $397,000.
e. Incurred various manufacturing overhead costs (e.g., depreciation, insurance, and utilities), $380,000.
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 $1,606,150 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 $3,165,000. The jobs cost $1,616,150 to manufacture according to their job cost sheets
Required:
1. What is the journal entry to record raw materials used in production? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
2. What is the ending balance in Raw Materials?
3. What is the journal entry to record the labor costs incurred during the year? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
4. What is the total amount of manufacturing overhead applied to production during the year?
5. What is the total manufacturing cost added to Work in Process during the year?
6. What is the journal entry to record the transfer of completed jobs that is referred to in item g above? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
7. What is the ending balance in Work in Process?
8. What is the total amount of actual manufacturing overhead cost incurred during the year?
9. Is manufacturing overhead underapplied or overapplied for the year? By how much?
10. What is the cost of goods available for sale during the year?
11. What is the journal entry to record the cost of goods sold referred to in item h above? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
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?
Explanation / Answer
1) Transaction General Journal Debit Credit b. Work in process inventory 666,400 Raw materials inventory 666,400 2) Ending balance in Raw Materials Raw materials Beg.bal 77,000 a. 708,000 666,400 b. End bal 118,600 3) Transaction General Journal Debit Credit c. Work in process inventory 480,000 Manufacturing overhead 150,000 Selling & administrative salaries 335,000 Factory wages payable 965,000 4) Manufacturing overhead applied ($11.75*41,000 DLH's) (41000*13.25) 543250 answer 5) Total manufacturing cost added during the year Direct materials 666,400 Direct labor 480,000 overhead applied 543,250 Total. 1,689,650 total manufacturing cost 1,689,650 answer 6) Transaction General Journal Debit Credit g. Finished goods inventory 1,606,150 Work in process inventory 1,606,150 7) Work in process Beg.bal 29,000 1,606,150 g. b. 666,400 c. 480,000 f. 543,250 End bal 112,500 8) total actual manufacturing overhead cost 530,000 answer indirect labor 150000 Various manfuacturing cost 380,000 total 530000 9) overapplied overhead 13,250 answer 10) Cost of goods available for sale 1,665,550 answer (59,400+1,606,150) 11) Transaction General Journal Debit Credit h. cost of good sold 1,616,150 Finished goods inventory 1,616,150 12) Finished goods Finished Goods Beg.bal 59,400 g. 1,606,150 1,616,150 h. End bal 49,400 13) Adjusted cost of goods sold 1,602,900 (1,616,150-13,250) 14) Gross margin 1,562,100 (sales - adjusted cost of goods sold) 15) Net operating income 830,100 answer Gross margin 1,562,100 less Selling & adm salaries -335,000 Various selling & adm -397,000 Net operating income 830,100
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