The Foundational 15 connect
LO3-1, LO3-2, LO3-3, LO3-4
Bunnell Corporation is a manufacturer that uses job-order costing. On January 1, the company's inventory balances were as follows:
Raw materials $40,000
Work in process $18,000
Finished goods $35,000
The company applies overhead cost to jobs using direct labor-hours. For this year, the company's predetermined overhead rate of
$16.25 per direct labor-hour was based on a cost formula that estimated $650,000 of total manufacturing overhead for an estimated
activity level of 40,000 direct labor-hours. The following transactions were recorded this year:
a. Raw materials purchased on account, $510,000.
b. Raw materials used in production, $480,000. All of of the raw materials were used as direct materials.
c. The following costs were accrued for employee services: direct labor. $600,000; indirect labor, $150,000; selling and
administrative salaries, $240,000.
d. Incurred various selling and administrative expenses (c.g., advertising, sales travel costs, and finished goods warchousing),
$367,000.
e. Incurred various manufacturing overhead costs (c.g., depreciation, insurance, and utilitics), $500,000.
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 $1,680.000 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 $2,800,000. The jobs cost $1,690,000 to manufacture
according to their job cost sheets.
Required:
For this year:
1. What is the journal entry to record raw materials used in production?
2. What is the ending balance in Raw Materials?
3. What is the journal entry to record the labor costs?
4. What is the total manufacturing overhead applied to production?
5. What is the total manufacturing cost added to Work in Process?
6. What is the journal entry to record the transfer of completed jobs referred to in item g above?
7. What is the ending balance in Work in Process?
8. What is the total actual manufacturing overhead cost incurred?
9. Is manufacturing overhead underapplied or overapplied? By how much?
10. What is the cost of goods available for sale?
11. What is the journal entry to record the cost of goods sold referred to in item h above?
12. What is the ending balance in Finished Goods?
13. Assuming the company closes its underapplied or overapplied overhead to Cost of Goods Sold, what is the adjusted cost of goods
sold?
14. What is the gross margin?
15. What is the net operating income?
