Sampson Company uses a job order cost system with overhead applied to products based on direct labor hours. Based on previous history, the company estimated its total overhead for the coming year (2014) to be $720,000 and its total direct labor hours to be 24,000. On January 1, 2014, the general ledger of Sampson Company revealed that it had one job in process (Job 102) for which it had incurred a total cost of $15,000. Job 101 had been finished the previous month for a total cost of $30,000 but was not yet sold. The company had a contract for Job 103 but had not started working on it yet. During January, the company had the following transactions: (a) Purchased $10,000 worth of raw materials on account. (b) Issued the following materials into production:

Item	Cost	Explanantion
direct materials	7,000	job 102: 2,000 job 103:5,000
Indirect materials	2,000	Used on both jobs
Total Materials	9,000

c) salaries/ wages payable:

Item	Cost	Explanantion
Direct labour	10,000	job 102: 6,000 job 103: 4,000
indirect labour	4,000	for factory supervision
Salaries	5,000	for administrative staff
Total Payroll	19,000

d)Applied overhead based on direct labour hours:

Item	Cost
Job 102	300 hours
Job 103	200 hours
Total	500 hours

e) Actual Manufacturing costs:

Item	Cost	Explanantion
rent	6,000	paid factory rent in cash
depreciation	5,000	factory equipment
insurance	3,000	1 month factory insurance policy expire
Utilities	2,000	Received factory bill but not pay
Total cost	16,000

f) recorded general/ administrative costs:

Item	Cost	Explanantion
advertising	2,000	paid cash
indirect labour	3,000	office equipment
Salaries	1,000	misc. exp not paid
Total Payroll	6,000

(g) Sold Job 101, which is recorded in Finished Goods Inventory at a cost of $30,000, for $55,000. (h) Completed Job 102 but did not sell it; Job 103 is still in process at year-end

1. Compute and interpret the predetermined overhead rate. 2. How much overhead would be applied to jobs during the period? 3. Compute the total cost of Jobs 102 and 103 at the end of the period. Where would the cost of each of these jobs appear on the year-end balance sheet? 4. Prepare journal entries to record the January transactions and post the entries to the general ledger T-accounts given earlier in the problem. 5. Calculate the amount of over- or underapplied overhead. 6. Prepare the journal entry to dispose of the overhead balance assuming that it had been a yearend balance instead of a month-end balance. Post the effect to the general ledger T-accounts. 7. Prepare a statement of cost of goods manufactured report including the adjustment for overor underapplied overhead. 8. Prepare a brief income statement for Sampson Company.