Nelson Invitations & More does customized, hand-crafted memorabilia, in which each batch of items is a job. The company has a highly labour intensive production process, so it allocates manufacturing overhead based on direct labour hours. Joust expects to incur $2,400,000 of manufacturing overhead costs and to use 40,000 direct labour hours during 20X7. At the end of May 20X7, Nelson Invitations & More reported the following inventories: Materials Inventory WIP Inventory Finished Goods Inventory $200,000 $170,000 $110,000 During June 20X7, Nelson Invitations & More actually used 3,000 direct labour hours and recorded the following transactions.

(i) Purchased materials on account $310,000

(ii) Manufacturing wages incurred $400,000

(iii) Materials requisitioned ( includes $30,000 of indirect materials) $420,000

(iv) Assigned manufacturing wages, 90% direct labour, 10% indirect labour (v) Other manufacturing overhead incurred $130,000

(vi) Allocated manufacturing overhead for June 20X7 (vii) Cost of jobs completed $995,000

(viii) Cost of jobs sold (on account) at a mark-up of 45% $960,000

Required:

(a) Compute Nelsons predetermined manufacturing overhead rate for 20X7.

(b) State the journal entries necessary to record the above transactions in the general journal. Assume that Nelson uses the perpetual inventory system.

(c) Post the manufacturing overhead transactions to the Manufacturing Overhead T-account and state the balance on the account before performing end of period closing entries. Show the journal entries necessary to dispose of the variance.

(d) What is the balance in the Cost of Goods Sold account after the adjustment?

(e) Compute Nelsons gross profit earned on the jobs

(f) Post the appropriate entries to Materials Inventory, Work-in-Process Inventory and Finished Goods Inventory accounts and determine the ending balances.