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Watkins Machinery Company uses a normal job costing system. The company has the following partial trial balance information for March, the last month of its

Watkins Machinery Company uses a normal job costing system. The company has the following partial trial balance information for March, the last month of its fiscal year:

Materials inventory (X, $7,500; Y, $5,000; Indirect materials, $12,500) $ 25,000
Work-in-process inventory (this is Job 101) 13,200
Finished goods inventory (this is Job 100) 22,000

These transactions relate to the month of March:

  1. Purchased direct materials and indirect materials with the following summary of receiving reports:

Material X $ 25,000
Material Y 25,000
Indirect materials 12,500
Total $ 62,500

  1. Issued direct materials and indirect materials with this summary of requisitions:

Job 101 Job 102 Total
Material X $ 12,500 $ 7,500 $ 20,000
Material Y 10,000 3,000 13,000
Subtotal $ 22,500 $ 10,500 $ 33,000
Indirect materials 20,000
Total $ 53,000

  1. Factory labor incurred is summarized by these time tickets:

Job 101 $ 26,400
Job 102 17,600
Indirect labor 12,500
Total $ 56,500

  1. Factory utilities, factory depreciation, and factory insurance incurred is summarized as follows:

Utilities $ 1,250
Depreciation 37,500
Insurance 6,250
Total $ 45,000

  1. Factory overhead costs were applied to jobs at the predetermined rate of $15 per machine hour. Job 101 incurred 3,000 machine hours; Job 102 used 2,000 machine hours.
  2. Job 101 was completed; Job 102 was still in process at the end of March.
  3. Job 100 and Job 101 were shipped to customers during March. Both jobs had gross margins of 20% based on manufacturing cost.
  4. The company closed the overapplied or underapplied overhead to the Cost of Goods Sold account at the end of March.

Required:

1. Prepare journal entries to record the transactions for the events from parts (a) through (g).

2. Compute the ending balance of the Work-in-process inventory account.

3. Compute the overhead variance and indicate whether it is overapplied or underapplied.

4. Close the overhead variance to the Cost of goods sold account.

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