Ted Crilly, the controller for Craggy Manufacturing Co, is in the process of analyzing

the overhead costs for the company. The companys job-order costing system uses direct labor hours as the cost driver for overhead application. Based on previous history, the companys budget for the coming year (2021) included the following estimates:

Budgeted total manufacturing overhead	$1,440,000
Budgeted total direct labor hours	48,000 hours

On January 1, 2021, the general ledger of Craggy Manufacturing Co revealed the following information relating to three jobs:

Job 221	Had been completed in the last month for a total cost of $60,000 but was not yet sold
Job 222	Had incurred a total cost of $30,000
Job 223	The company has just signed a contract for the job but it has not started.

In addition, the 1st of January, 2021 balances in selected accounts are as follows:

Raw materials inventory	$20,000
Manufacturing Overhead	$0
Work in Process Inventory	$30,000
Finished Goods Inventory	$60,000
Cost of Goods Sold	$0
Sales Revenue	$0
Selling, General and Administrative Expenses	$0
Cash & other Assets	$200,000
Payable and other Liabilities	$170,000

During January, the company had the following transactions:

1. Purchased $20,000 raw materials on account
2. Issued the following materials into production:

Direct Materials	Job 222: $4,000 Job 223: $10,000
Indirect Materials	4,000 (used on both Job 222 & 223)

3. Recorded following salaries and wages payables

Direct Labor	Job 222: $ 12,000 Job 223: $8,000
Salaries payable to factory supervisor	$8,000
Salaries payable to administrative staff	$10,000

4. Applied overhead to jobs:

Job 222	600 hours
Job 223	400 hours

5. Paid factory rent $12,000 in cash
6. Paid advertising costs $4,000 in cash
7. Depreciation on administrative office equipment amounted to $6,000
8. Depreciation on factory equipment amounted to $10,000
9. One month factory insurance expired amounted to $6,000 . The insurance policy has been prepaid in the last year.
10. Received factory utility bill of $ 4,000 but not paid.
11. Headquarter utility expense incurred $ 2,000 but not paid.
12. Sold Job 221 for $ 110,000 in cash, which is recorded in Finished Good Inventory at a cost of $ 60,000.
13. Finished Job 222 but did not sell it; Job 223 still in process at year-end.

Required:

Prepare a report that addresses the following:

1. Calculate and interpret the companys predetermined overhead rate
2. Prepare journal entries to record the events for January.
3. Set up ledger accounts, and post the journal entries made in requirement 2.
4. Calculate the over-applied or under-applied overhead for January. Prepare a journal entry to close this balance into cost of goods sold. Post the effect to the ledger account.
5. Calculate the total manufacturing costs of Job 222 and 223 at the end of the period. Which asset account would be used to record the cost of each of these jobs ?
6. Prepare a schedule of cost of goods manufactured and an income statement for January including the adjustment for over or under applied overhead.