Palmer Tech Industries designs and builds custom technology solutions for their clients. Because of their particular process they use a job costing system to keep track of their job orders. Each job has a separate record that shows the detail of direct materials, direct labor and applied (or allocated) overhead costs incurred. When an order is completed, the system closes the job and transfers it to finished goods inventory until the job is delivered to the client.

At the end of January there were no jobs in the finished goods inventory account and there were two jobs in process: Job 1-05 and Job 1-07. The job records for January indicated the following information regarding the jobs traceable costs:

	Job 01-5	Job 01-7
Direct Materials	$ 4,675	$ 3,200
Direct Labor	$ 1,300	$ 500

During February the following traceable costs were incurred:

	Job 01-5	Job 01-7	Job 02-1	Job 02-2	Job 02-3	Job 02-4	Job 02-5
Direct Materials	$ 1,000	$ 3,200	$ 6,230	$ 3,450	$ 4,335	$ 1,112	$ 500
Direct Labor	$ 1,750	$ 2,300	$ 3,400	$ 2,150	$ 1,200	$ 300	$ 50

During February, Palmer completed Jobs 01-5, 01-7, 02-1, 02-2 and 02-3; Jobs 01-5, 01-7 and 02-2 were delivered to clients.

Additional Information:

Palmer allocates manufacturing overhead to production based on direct labor hours. For the current year Palmer has estimated manufacturing overhead costs of $210,000 and direct labor hours of 6,000.

Palmer pays direct labor at a rate of $25 per hour.

As part of the month closing process, overhead is applied to production and any over/under allocated overhead is closed (written-off) against cost of goods sold.

Actual overhead costs incurred in February were $18,000.

Required:

1. Compute Februarys beginning Work-in-Process.

2, Prepare the following Journal Entries for the month of February:

a) The issuance of direct materials to production.

b) The direct labor costs incurred during the month.

c) Allocation of manufacturing overhead to production.

d) The transfer of the completed jobs to finished goods.

e) The cost of goods.

f) The write-off of over/under allocated overhead.

3. Compute Februarys ending Work-in-Process.

4. Compute Februarys Finished Goods Inventory.

5. Compute Februarys Cost of Goods sold.

Hints:

Do not forget to apply overhead to each job.

Do not forget the beginning balance in the WIP account.