Questions:

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 $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) 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 computed in requirement (c).

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 $92,500 in direct materials and 5,000 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?

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 Page 302 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 67,000 54,000 Manufacturing overhead costs incurred Indirect labor $2,760,000 $2,160,000 Employee benefits 1,005,000 810,000 Supplies 670,000 540,000 Power 627,000 522,000 Heat and light 138,000 138,000 Supervision 776,250 656,250 Depreciation 1,982,500 1,982,500 Property taxes and insurance 751,250 751,250 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-275 Job MC-270 $270,000 2,500 hours Direct material costs Direct labor-hours $495,000 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 $103,500 MC-399 $28,900 Direct $67,000 materials $43,200 Direct labor- 1,740 2,700 6,100 1,300 hours hours hours hours hours Job status Finished Finished In progress In progress