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The Foundational 15 (Algo) [LO3-1, LO3-2, LO3-3, LO3-4]

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

Raw materials	$ 77,000
Work in process	$ 29,000
Finished goods	$ 59,400

The company applies overhead cost to jobs on the basis of direct labor-hours. For the current year, the companys predetermined overhead rate of $13.25 per direct labor-hour was based on a cost formula that estimated $530,000 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, $708,000.
2. Raw materials used in production, $666,400. All of of the raw materials were used as direct materials.
3. The following costs were accrued for employee services: direct labor, $480,000; indirect labor, $150,000; selling and administrative salaries, $335,000.
4. Incurred various selling and administrative expenses (e.g., advertising, sales travel costs, and finished goods warehousing), $397,000.
5. Incurred various manufacturing overhead costs (e.g., depreciation, insurance, and utilities), $380,000.
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 $1,606,150 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 $3,165,000. The jobs cost $1,616,150 to manufacture according to their job cost sheets.

Foundational 3-15 (Algo)

15. What is the net operating income for the year?