Exam 2 Review Practice Problem 1 (Ch.3): Bruno Corporation is a manufacturer that uses job-order costing. On January 1, the company's inventory balances were as follows: Raw materials Work in process Finished goods $ 40,000 $ 18,000 $ 35,000 The company applies overhead cost to jobs on the basis of direct labor-hours. For the current year, the company 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 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. a. Prepare the journal entries and t-accounts for the above transactions. b. Calculate the manufacturing overhead applied. c. Prepare a Schedule of Cost of Goods Manufactured. d. Was the overhead underapplied or overapplied? By how much? e. Prepare a Schedule of Cost of Goods Sold for the month. f. Prepare an Income Statement for the year. (The company closes any underapplied or overapplied overhead to Cost of Goods Sold.) Exam 2 Review Practice Problem 1 (Ch.3): Bruno Corporation is a manufacturer that uses job-order costing. On January 1, the company's inventory balances were as follows: Raw materials Work in process Finished goods $ 40,000 $ 18,000 $ 35,000 The company applies overhead cost to jobs on the basis of direct labor-hours. For the current year, the company 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 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. a. Prepare the journal entries and t-accounts for the above transactions. b. Calculate the manufacturing overhead applied. c. Prepare a Schedule of Cost of Goods Manufactured. d. Was the overhead underapplied or overapplied? By how much? e. Prepare a Schedule of Cost of Goods Sold for the month. f. Prepare an Income Statement for the year. (The company closes any underapplied or overapplied overhead to Cost of Goods Sold.)