A manufacturer uses job-order costing. On January 1, the company's inventory balances were as follow Raw materials Work in process Finished goods $50,500 $25,000 $38,100 The company applies overhead cost to jobs on the basis of direct labor-hours. For the current year, the company's predetermined overhead rate was based on a cost formula that estimated $470,000 of total manufacturing overhead for an estimated activity level o 40,000 direct labor-hours. The following transactions were recorded for the year: a. Raw materials were purchased on account, $592,000. b. Raw materials used in production, $557,000. All of of the raw materials were used as direct materials. c. The following costs were accrued for employee services: direct labor, $442,000; indirect labor, $150,000; selling and administrative salaries, $295,000. d. Incurred various selling and administrative expenses (e.g., advertising, sales travel costs, and finished goods warehousing), $381,000 e. Incurred various additional manufacturing overhead costs (e.g., depreciation, insurance, and utilities), $320,000. f. Manufacturing overhead cost was applied to production. The company actually worked 41,000 direct labor-hours on all jobs during the year. g. Jobs costing $1,399,450 to manufacture according to their job cost sheets were completed during the year. h. Jobs were sold on account to customers during the year for a total of $2,914,000. The jobs cost $1,409,000 to manufacture according to their job cost sheets. The company closes any over- or under-applied manufacturing overhead to Cost of Goods Sold. What is the gross margin for the year?
A manufacturer uses job-order costing. On January 1, the company's inventory balances were as follow Raw materials Work in process Finished goods $50,500 $25,000 $38,100 The company applies overhead cost to jobs on the basis of direct labor-hours. For the current year, the company's predetermined overhead rate was based on a cost formula that estimated $470,000 of total manufacturing overhead for an estimated activity level o 40,000 direct labor-hours. The following transactions were recorded for the year: a. Raw materials were purchased on account, $592,000. b. Raw materials used in production, $557,000. All of of the raw materials were used as direct materials. c. The following costs were accrued for employee services: direct labor, $442,000; indirect labor, $150,000; selling and administrative salaries, $295,000. d. Incurred various selling and administrative expenses (e.g., advertising, sales travel costs, and finished goods warehousing), $381,000 e. Incurred various additional manufacturing overhead costs (e.g., depreciation, insurance, and utilities), $320,000. f. Manufacturing overhead cost was applied to production. The company actually worked 41,000 direct labor-hours on all jobs during the year. g. Jobs costing $1,399,450 to manufacture according to their job cost sheets were completed during the year. h. Jobs were sold on account to customers during the year for a total of $2,914,000. The jobs cost $1,409,000 to manufacture according to their job cost sheets. The company closes any over- or under-applied manufacturing overhead to Cost of Goods Sold. What is the gross margin for the year?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:### Job-Order Costing: An Overview
**Inventory Balances as of January 1:**
- **Raw Materials:** $50,500
- **Work in Process:** $25,000
- **Finished Goods:** $38,100
---
**Overhead Cost Application**
The company applies overhead costs to jobs based on direct labor-hours. The predetermined overhead rate for the current year was derived from a cost formula estimating $470,000 total manufacturing overhead for 40,000 direct labor-hours.
**Yearly Transactions:**
a. **Raw Materials Purchased:** $592,000
b. **Raw Materials Used in Production:** $557,000 (all used as direct materials)
c. **Employee Services Costs:**
- Direct Labor: $442,000
- Indirect Labor: $150,000
- Selling and Administrative Salaries: $295,000
d. **Selling and Administrative Expenses:** $381,000 (e.g., advertising, sales travel, finished goods warehousing)
e. **Additional Manufacturing Overhead Costs:** $320,000 (e.g., depreciation, insurance, utilities)
f. **Applied Manufacturing Overhead:** Aligned with the 41,000 direct labor-hours worked during the year
g. **Completed Jobs:** Costs totaled $1,399,450
h. **Jobs Sold to Customers:** Sales total of $2,914,000; manufacturing cost of $1,409,000
The company adjusts any over- or under-applied manufacturing overhead to Cost of Goods Sold.
**Question:**
What is the gross margin for the year?
**Options:**
- $1,516,750
- $1,505,000
- $1,493,250
- None of the answers listed
- $1,554,550
(Note: The question involves calculating the gross margin from the given data. Gross margin is typically the sales revenue minus the cost of goods sold, factoring in adjustments for applied overhead.)
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