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 $37 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.

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. For the purpose of computing the predetermined overhead rate, OLeary uses the previous years actual overhead rate. Data on direct material costs and direct labor-hours for these jobs in year 2 follow.

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.

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

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 costs of $61,000 and used an additional 700 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 $94,500 in direct materials and 5,200 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?

Year 1 71,000 Year 2 58,000 Direct labor-hours worked Manufacturing overhead costs incurred Indirect labor Employee benefits Supplies Power Heat and light Supervision Depreciation Property taxes and insurance Total manufacturing overhead costs $2,920,000 1,065,000 710,000 667,000 146,000 787,850 2,102,500 831,650 $9, 230,000 $2,320,000 870,000 580,000 562,000 146,000 668, 250 2,102,500 871,250 $8,120,000 Direct material costs Direct labor-hours Job MC-270 $274,000 2,700 hours Job MC-275 $499,000 3,400 hours Direct material costs Direct labor-hours Actual manufacturing overhead $11,844,000 78,000 $10,080,000 Direct materials Direct labor-hours Job status MC-389 $47,200 1,780 hours Finished MC-390 $71,000 2,900 hours Finished MC-397 $107,500 6,300 hours In progress MC-399 $32,900 1,500 hours In progress Work-in-process inventory Finished goods inventory Final (total) cost charged overhead General Journal Debit Credit Transaction 1 Minimum amount