Big Melon company uses a job cost system which applies overhead on the basis of direct labour hours. At the beginning of the quarter, Big Melon estimates total manufacturing costs of $112,500 and total direct labour hours of 15,000.

At the end of the quarter, Big Melon tabulates the following actual information.

Purchase of raw materials (all direct) $200,000

Direct labour (average hourly rate of $25)400,000

Manufacturing overhead costs 100,000

Change in inventories:

Increase in raw materials $25,000

Increase in work in process 16,000

Increase in finished goods 30,000

Required:

1. Calculate the cost of goods manufactured.

2. Calculate the cost of goods sold before prior to any adjustment for under or overapplied overhead.

3. journal entry to close any under or overapplied manufacturing overhead cost to cost of goods sold. Is such an entry appropriate in this situation? Why or why not?

4. Analyze the under or overapplied manufacturing overhead cost into two separate components: amount due to incorrect estimate of the annual manufacturing overhead costs and an amount due to incorrect estimate of the annual direct labour cost.