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O'Leary 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). O'Leary uses a normal job costing system. Direct labor at O'Leary is paid $32 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 70,000 57,000

Manufacturing overhead costs incurred

Indirect labor $2,880,000 $2,280,000

Employeebenefits 1,050,000 855,000

Supplies 700,000 570,000

Power 657,000 552,000

Heatandlight 144,000 144,000

Supervision 784,950 665,250

Depreciation 2,072,500 2,072,500

Property taxes and insurance 811,550 841,250

Total manufacturing overhead costs $9,100,000 $7,980,000

At the beginning of year 3, O'Leary 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, O'Leary uses the previous year's 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 $273,000 $498,000

Direct labor-hours 2,650hours 3,350hours

During year 3, O'Leary 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 $11,843,000

Direct labor-hours 77,000

Actual manufacturing overhead $9,840,000

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 $46,200 $70,000 $106,500 $31,900

Direct labor-hours 1,770 hours 2,850 hours 6,250 hours 1,450hours

Job status Finished Finished In progress In progress

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

b.O'Leary incurred direct materials costs of $60,000 and used an additional 600 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.O'Leary 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.(If no entry isrequiredfor a transaction/event, select "No journal entry required" in the first account field.)

1 Record the entry to prorate any over- or underapplied overhead. Note: Enter debits before credits.

e.A customer has asked O'Leary to bid on a job to be completed in year 4. O'Leary estimates that the job will require about $94,000 in direct materials and 5,150 direct labor-hours. Because of the economy, O'Leary 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. O'Leary estimates that there would be virtually no sales or administrative costs associated with this job. What is the minimum amount O'Leary can bid on the job and still not incur a loss?

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