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OLeary Corporation manufactures special purpose portable structures (huts, mobile offices, and so on) for use at construction sites. It only builds to order (each unit is built to customer specifications). OLeary uses a normal job costing system. Direct labor at OLeary is paid $34 per hour, but the employees are not paid if they are not working on jobs. Manufacturing overhead is assigned to jobs by a predetermined rate on the basis of direct labor-hours. The company incurred manufacturing overhead costs during two recent years (adjusted for price-level changes using current prices and wage rates) as follows.

		Year 1			Year 2
Direct labor-hours worked		70,400			57,400
Manufacturing overhead costs incurred
Indirect labor	$	2,896,000		$	2,296,000
Employee benefits		1,056,000			861,000
Supplies		704,000			574,000
Power		661,000			556,000
Heat and light		144,800			144,800
Supervision		786,110			666,450
Depreciation		2,084,500			2,084,500
Property taxes and insurance		819,590			853,250
Total manufacturing overhead costs	$	9,152,000		$	8,036,000

At the beginning of year 3, OLeary has two jobs, which have not yet been delivered to customers. Job MC-270 was completed on December 27, year 2. It is scheduled to ship on January 7, year 3. Job MC-275 is still in progress. For the purpose of computing the predetermined overhead rate, OLeary uses the previous years actual overhead rate. Data on direct material costs and direct labor-hours for these jobs in year 2 follow.

	Job MC-270			Job MC-275
Direct material costs	$	273,400		$	498,400
Direct labor-hours		2,670	hours		3,370	hours

During year 3, OLeary incurred the following direct material costs and direct labor-hours for all jobs worked in year 3, including the completion of Job MC-275.

Direct material costs	$	11,843,400
Direct labor-hours		77,400
Actual manufacturing overhead	$	9,936,000

At the end of year 3, there were four jobs that had not yet shipped. Data on these jobs follow.

	MC-389			MC-390			MC-397			MC-399
Direct materials	$46,600			$70,400			$106,900			$32,300
Direct labor-hours	1,774 hours			2,870 hours			6,270 hours			1,470 hours
Job status	Finished			Finished			In progress			In progress

Required:

a. What was the amount, in the beginning, Finished Goods and beginning Work-in-Process accounts for year 3?

b. OLeary incurred direct materials costs of $60,400 and used an additional 640 hours in year 3 to complete job MC-275. What was the final (total) cost charged to job MC-275?

c. What was over- or underapplied overhead for year 3?

d. OLeary prorates any over-or underapplied overhead to Cost of Goods Sold, Finished Goods Inventory, and Work-in-Process Inventory. Prepare the journal entry to prorate the over-or underapplied overhead.

e. A customer has asked OLeary to bid on a job to be completed in year 4. OLeary estimates that the job will require about $94,200 indirect materials and 5,170 direct labor-hours. Because of the economy, OLeary expects demand for its services to be low in year 4, and the CEO wants to bid aggressively but does not want to lose any money on the project. OLeary estimates that there would be virtually no sales or administrative costs associated with this job. What is the minimum amount OLeary can bid on the job and still not incur a loss?

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