O$$Leary Corporation manufactures special purpose portable structures $($huts$,$ mobile offices, and so on$)$ for use at construction sites. It only builds to order $($each unit is built to customer specifications$).$ O$$Leary uses a normal job costing system. Direct labor at O$$Leary is paid $$17$ per hour, but the employees are not paid if they are not working on jobs. Manufacturing overhead is assigned to jobs by a predetermined rate on the basis of direct labor$-$hours. The company incurred manufacturing overhead costs during two recent years $($adjusted for price$-$level changes using current prices and wage rates$)$ as follows.

Year $1$ Year $2$

Direct labor$-$hours worked $67,00054,000$

Manufacturing overhead costs incurred

Indirect labor $ $2,760,000$ $ $2,160,000$

Employee benefits $1,005,000810,000$

Supplies $670,000540,000$

Power $627,000522,000$

Heat and light $138,000138,000$

Supervision $776,250656,250$

Depreciation $1,982,5001,982,500$

Property taxes and insurance $751,250751,250$

Total manufacturing overhead costs $ $8,710,000$ $ $7,560,000$

At the beginning of year $3,$ O$$Leary has two jobs, which have not yet been delivered to customers. Job MC$-270$ was completed on December $27,$ year $2.$ It is scheduled to ship on January $7,$ year $3.$ Job MC$-275$ is still in progress. For the purpose of computing the predetermined overhead rate, O$$Leary uses the previous year$$s actual overhead rate. Data on direct material costs and direct labor$-$hours for these jobs in year $2$ follow.

Job MC$-270$ Job MC$-275$

Direct material costs $ $270,000$ $ $495,000$

Direct labor$-$hours $2,500$ hours $3,200$ hours

During year $3,$ O$$Leary incurred the following direct material costs and direct labor$-$hours for all jobs worked in year $3,$ including the completion of Job MC$-275.$

Direct material costs $ $11,840,000$

Direct labor$-$hours $74,000$

Actual manufacturing overhead $ $9,120,000$

At the end of year $3,$ there were four jobs that had not yet shipped. Data on these jobs follow.

MC$-389$ MC$-390$ MC$-397$ MC$-399$

Direct materials $$43,200$ $$67,000$ $$103,500$ $$28,900$

Direct labor$-$hours $1,740$ hours $2,700$ hours $6,100$ hours $1,300$ hours

Job status Finished Finished In progress In progress

Required:

a$.$ What was the amount in the beginning Finished Goods and beginning Work$-$in$-$Process accounts for year $3?$

b$.$ O$$Leary incurred direct materials costs of $$57,000$ and used an additional $300$ hours in year $3$ to complete job MC$-275.$ What was the final $($total$)$ cost charged to job MC$-275?$

c$.$ What was over$-$ or underapplied overhead for year $3?$

d$.$ O$$Leary prorates any over$-$ or underapplied overhead to Cost of Goods Sold, Finished Goods Inventory, and Work$-$in$-$Process Inventory. Prepare the journal entry to prorate the over$-$ or underapplied overhead.

e$.$ A customer has asked O$$Leary to bid on a job to be completed in year $4.$ O$$Leary estimates that the job will require about $$92,500$ in direct materials and $5,000$ direct labor$-$hours. Because of the economy, O$$Leary expects demand for its services to be low in year $4,$ and the CEO wants to bid aggressively, but does not want to lose any money on the project. O$$Leary estimates that there would be virtually no sales or administrative costs associated with this job. What is the minimum amount O$$Leary can bid on the job and still not incur a loss?