Dunn Manufacturing Company applies manufacturing overhead on the basis of direct materials costs. The estimates for 2012 were:

Direct materials costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $270,000

Manufacturing overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,000

Following are the transactions of Dunn Manufacturing Company for 2012:

a. Raw materials purchased on account, $265,000 (85% for direct use and 15% for indirect use)

b. Raw materials issued to production, 85% for direct use and 15% for indirect use, for a total of $190,000

c. Direct labor costs, $230,000

d. Indirect labor costs, $28,000

e. Administrative and sales salaries, $75,000 and $40,000, respectively

f. Utilities, $11,500; plant depreciation, $22,000; maintenance, $8,500 (These costs are allocated on the basis of plant floor space—administrative facilities, 1,000 square feet; manufacturing, 5,000 square feet; sales facilities, 2,000 square feet.)

g. Manufacturing equipment depreciation, $6,500

h. Additional raw materials issued to production for direct use, $120,000

i. Manufacturing overhead is applied.

j. Recorded factory supervisor’s salary, $25,000

k. Ninety percent of existing Work-in-Process Inventory is transferred to Finished Goods Inventory. (Work-in-Process beginning inventory was $10,000.)

l. All finished goods are sold. (Assume no beginning inventory. Sales are marked up an additional 40% of cost.)

m. Over- or under-applied manufacturing overhead is closed entirely to Cost of Goods Sold.

Required:

1. Prepare a journal entry for each of the transactions and show the T-accounts for Manufacturing Overhead and Work-in-Process Inventory.

2. What is the ending balance in the cost of goods sold account?

3. Interpretive Question: Comparing actual manufacturing overhead with estimates for 2012, what would you recommend that Dunn Manufacturing Company estimate for manufacturing overhead costs in 2013?