Maritime Equipment Company uses normal job-order costing in its only department. The company charges overhead based on direct labor cost. The estimated overhead cost for 2020 was $125,000 and the estimated direct labor cost was $80,000. The Materials Control account includes both direct and indirect materials. The beginning Materials Control for 2020 was $5,000. The beginning Work in Process Control for 2020 was $10,000 (all charged to Job 100). The beginning Finished Goods Control for 2020 was $7,500 and consisted of 15 units of Job 050 that cost $500 each. The following direct costs were charged to jobs during 2020.

Job 100 Job 125 Job 150

Direct Materials Cost $4,000 $20,500 $25,000

Direct Labor Cost $8,000 $30,000 $40,000

The total cost of all materials purchased in 2020 was $60,000. The actual overhead cost during 2020 was $132,000, $8,000 of which was for indirect materials. Job 100 and Job 125 were completed during 2020. Job 100 consisted of 300 units, and Job 125 consisted of 800 units. During 2020, the company sold 10 units of Job 050, all 300 units from Job 100, and 500 units from Job 125. The total Sales Revenue for 2020 was $130,500 and the total Selling & Administrative Expenses were $24,625 for the year. At the end of 2020, any under allocated or overallocated overhead was charged totally to Cost of Goods Sold.

1.

a. Compute the amount of underallocated or overallocated overhead for the year.

b. Label it as either underallocated or overallocated overhead

2. Prepare, in good form, a Schedule of Cost of Goods Manufactured for the year ending December 31, 2018. YOU WILL NEED TO INCLUDE A PROPER HEADING ON YOUR SCHEDULE.

3. Prepare, in good form, an Income Statement for the year ending December 31, 2018. YOU WILL NEED TO INCLUDE A PROPER HEADING ON YOUR FINANCIAL STATEMENT.

4. Now, using the most accurate method of “deal: with the under or overallocated overhead. This was our Method 3. Prepare a table showing your calculations of prorated overhead to each of the three accounts: WIP,FG and COGS.

5. Prepare the journal entry that we would use to reconcile the accounts in preparation of financial statement compilation based for the method in requirement 4. You do not need to prepare a new set of financial statements using this method.