Valport Company employs a job cost system based on the full absorption of actual costs Factory overtiead is applied on the basis of machine hours (MH) using a predetennined overhead rate. The current fiscal year rate of $15.00 per MH is based on estimated factory overhead costs of $1,200,000 and an estimated activity level of 80,000 machine hours. Valport's policy is to close the over/under application of factory overhead to the Cost of Goods Sold.

Operations for the year ended November 30, 19X8 have been completed, and all accounting entries have been made for the year except the application of manufacturing overhead to the jobs worked on during November, the transfer of costs from Work-in-

Process to Finished Goods for the jobs completed in November, and the transfer of costs from Finished Goods to Cost of Goods Sold for the jobs that have been sold during November.

Summarized data that have been accumulated from the accounting records as of October 31 , 1 9X8 and for November 1 9X8, are presented below.

Material purchases and materials inventory consists of both direct and indirect materials.
The balance of the Materials Inventory account as of November 30, 19X8, is $85,000.
Jobs N1 1-007, N1 1-013, and N11-015 were completed during November 19X8. All completed jobs except Job Nil -01 3 had been tumed over to customers by the close of business on November 30, 19X8.
REQUIRED:
1 .
Valport Company uses a predetermined overhead rate to apply factory overhead to its jobs. When overhead is accounted for in this manner, there may be over- or underapplied overhead.

a. Explain why a business uses a predetemiined overhead rate to apply factory overhead to its jobs.

b. How much factory overhead would Valport have applied to jobs through October 31,19X8?

c. How much factory overhead would be applied to jobs by Valport during November 19X8?

d. Determine the amount by which the factory overhead is over- or underapplied as of November 30, 19X8. Be sure to indicate whether the overhead is over- or underapplied.

e. Over- or underapplied overhead must be eliminated at the end of the accounting period. Explain why Valport's method of closing over-or underapplied overhead to the Cost of Goods Sold is acceptable in this case.
2. Determine the balance in Valport Company's finished goods inventory at November 30, 19X8.

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Work-in-Process Balance November 19X8 Activity Job No. 10/31/X8 Direct Materials Direct Machine Labor Hours N11-007 $ 87,000 $ 1,500 $ 4,500 300 N11-013 55,000 4,000 12,000 1,000 N11-015 -0- 25,600 26,700 1,400 D12-002 -0- 37,900 20,000 2,500 D12-003 -0- 26,000 16,800 _800 $142,000 $95,000 $80,000 6,000