Question

Bunnell Corporation is a manufacturer that uses job-order costing. On January 1, the company’s inventory balances were as follows:

Raw materials	$	50,000
Work in process	$	30,800
Finished goods	$	43,200

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 $12.00 per direct labor-hour was based on a cost formula that estimated $480,000 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, $696,000.
2. Raw materials used in production, $655,400. All of of the raw materials were used as direct materials.
3. The following costs were accrued for employee services: direct labor, $430,000; indirect labor, $150,000; selling and administrative salaries, $251,000.
4. Incurred various selling and administrative expenses (e.g., advertising, sales travel costs, and finished goods warehousing), $411,000.
5. Incurred various manufacturing overhead costs (e.g., depreciation, insurance, and utilities), $330,000.
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 $1,521,800 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 $3,255,000. The jobs cost $1,531,800 to manufacture according to their job cost sheets.

10. What is the cost of goods available for sale during the year?

Answer 1

COST OF GOODS AVAILABLE FOR SALE

Particulars	$
Beginning Finished goods	43,200
Add: Cost of goods manufactured	1,521,800
Cost of goods available for sale	1,565,000

Working Notes:

Cost of goods manufactured

Particulars	$
Direct Materials used in production	655,400
Direct Labor	430,000
Manufacturing overheads (41,000 direct labor hours * $12)	492,000
Add: Beginning Work in Process	30,800
Total Cost of Work in process	1,608,200
Less: Ending Work in process ($1,608,200 - $1,521,800)	86,400
Cost of goods manufactured	1,521,800

All the best...