Hudson, Inc. uses a job order cost system and applies overhead to production on the basis of direct labor costs. On January 1, 2018, Job #1 had been previously completed at a cost of $20,000 and was in Finished Goods Inventory. On January 1, 2018, Job #2 was the only job in process. The costs incurred on Job #2 during December 2017 were as follows: Direct Materials of $5,000, Direct Labor of $3,000 and Manufacturing Overhead of $6,000. There was no balance in Raw Materials at the beginning of January.

During the month of January, the company finished job #2 and began production on jobs #3 and #4. Job #3 was finished during January, but job #4 was still unfinished at the end of January.

Sales: during January, Job #1 was sold for $28,000 and Job #2 was sold for $42,000 to two different customers.

The following additional events occurred during January.

Purchased Raw Materials for $25,000, on account.

Incurred Factory Labor Costs of $16,000. Of this amount, $4,000 related to Employer Payroll Taxes.

Incurred Manufacturing Overhead Costs as follows: indirect materials $3,000, indirect labor $6,000, depreciation expense $3,000 and various other Manufacturing Overhead Costs on account $6,000.

Assigned Direct Materials and Direct Labor to Jobs as follows:

Job	Direct Materials	Direct Labor
2	$7,000	$2,000
3	$10,000	$5,000
4	$3,000	$3,000

Instructions:

Calculate the predetermined overhead rate for 2018, assuming LL, Inc. estimates total manufacturing overhead costs of $150,000 and total direct labor costs of $100,000.

Attached are job cost sheets for jobs 1, 2, 3 and 4. Enter the January 1 balances for job #2.

Prepare the journal entries to record the purchase of the raw materials, the factory labor costs incurred and the manufacturing overhead costs incurred during January.

Prepare the journal entries to record the assignment of Direct Materials, Direct Labor and Manufacturing Overhead to Work in Process. Post all costs to the job cost sheets as necessary.

Total the job cost sheets for the jobs completed in January (jobs 2 and 3).

Prepare the journal entries to move jobs 2 and 3 into Finished Goods Inventory.

Prepare the journal entries to sell job #1 for $28,000 and job #2 for $42,000, both on account to different customers.

What is the balance in the Work in Process Inventory account? What does that balance consist of?

What is the amount of over- or underapplied overhead?