Question

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 on the basis of direct labor-hours. For the current 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 for the year:

Raw materials were purchased on account, $510,000.

Raw materials use in production, $480,000. All of of the raw materials were used as direct materials.

The following costs were accrued for employee services: direct labor, $600,000; indirect labor, $150,000; selling and administrative salaries, $240,000.

Incurred various selling and administrative expenses (e.g., advertising, sales travel costs, and finished goods warehousing), $367,000.

Incurred various manufacturing overhead costs (e.g., depreciation, insurance, and utilities), $500,000.

Manufacturing overhead cost was applied to production. The company actually worked 41,000 direct labor-hours on all jobs during the year.

Jobs costing $1,680,000 to manufacture according to their job cost sheets were completed during the year.

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.

5. What is the total manufacturing cost added to Work in Process during the year?

8. What is the total amount of actual manufacturing overhead cost incurred during the year?

Answer 1

Part 5)

The value of total manufacturing cost added to work in process during the year is calculated as follows:

Raw Material Used	480,000
Direct Labor	600,000
Manufacturing Overhead Applied (41,000*16.25)	666,250
Total Manufacturing Cost added to Work in Process	$1,746,250

______

Part 8)

The total amount of actual manufacturing overhead cost incurred during the year is determined as below:

Indirect Labor	150,000
Depreciation, Insurance, Utilities, etc.	500,000
Total Actual Manufacturing Overhead Cost	$650,000