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OLeary Corporation manufactures special purpose portable structures (huts, mobile offices, and so on) for use at construction sites. It only builds to order (each unit

OLeary 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). OLeary uses a normal job costing system. Direct labor at OLeary is paid $18 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 69,900 54,900
Manufacturing overhead costs incurred
Indirect labor $ 2,769,000 $ 1,534,500
Employee benefits 1,044,000 819,000
Supplies 699,000 549,000
Power 552,900 582,900
Heat and light 138,900 138,900
Supervision 717,150 777,150
Depreciation 1,983,400 1,983,400
Property taxes and insurance 752,150 752,150
Total manufacturing overhead costs $ 8,656,500 $ 7,137,000

At the beginning of year 3, OLeary 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. The predetermined rate in year 2 was $120 per direct labor hour. 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 $ 270,900 $ 495,900
Direct labor-hours 2,590 hours 3,290 hours

During year 3, OLeary 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 $ 11,930,000
Direct labor-hours 74,900
Actual manufacturing overhead $ 9,111,000

For the purpose of computing the predetermined overhead rate, OLeary uses the previous years actual overhead rate. 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 $44,100 $67,900 $104,400 $29,800
Direct labor-hours 1,830 hours 1,915 hours 3,104 hours 1,390 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. OLeary incurred direct materials cost of $57,900 and used an additional 309 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. OLeary 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 OLeary to bid on a job to be completed in year 4. OLeary estimates that the job will require about $93,400 in direct materials and 5,090 direct labor-hours. Because of the economy, OLeary 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. OLeary estimates that there would be virtually no sales or administrative costs associated with this job. What is the minimum amount OLeary can bid on the job and still not incur a loss? (Do not round intermediate calculations.)

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