Yu Technology Co. manufactures CDs and DVDs for computer software and entertainment companies. Yu uses job order costing and has a perpetual inventory system. The business has a highly labour intensive production process, so it applies manufacturing overhead to jobs based on direct labour cost. Yu expects to incur $1,080,000 0f manufacturing overhead costs and estimated direct labour costs of $900,000 during 2015. At the end of March 2015,

Yu Technology reported work in process inventory of $15,000

During April 2015, Yu Technology recorded the following transactions.

1) Materials requisitioned for use in production:

Direct materials: $120,000

Indirect materials: $20,000

2) Advertising costs were incurred, $15,000.

3) Salaries and wages incurred as follows:

Direct labour $121,875

Indirect labour $40,625

Selling and administrative salaries $ 25,000

4) Insurance expired during the year, $30,000 (90% relates to the factory, the remainder is on selling and administrative items).

5) Depreciation recorded for the year, $80,000 (75% relates to factory assets and the remainder relates to selling and administrative assets).

6) Utilities expense incurred, $53,750 (80% of this amount relates to the factory, the remainder relates to the administrative offices).

7) Applied manufacturing overhead costs to jobs

8) Two jobs were completed with total costs of $120,000 & $85,000 respectively. They were sold on account at a mark-up of 75% on cost.

All purchases and services were acquired on account.

1. State the journal entries necessary to record the above transactions in the general journal.

2. Is manufacturing overhead over-applied or under-applied? By how much?

3. Record a journal entry to close manufacturing overhead to cost of goods sold.