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 overhead costs during two recent years (adjusted for price-level changes using current prices and wage rates) as follows:

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. The predetermined rate in year 2 was $130 per direct labor-hour. Data on direct material costs and direct labor-hours for these jobs in year 2 follow:

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

For the purpose of computing the predetermined overhead rate, O€™Leary uses the previous year€™s actual overhead rate. At the end of year 3, there were four jobs that had not yet shipped. Data on these jobs follow:

Required
a. What was the amount in the beginning Finished Goods and beginning Work-In-Process accounts for year 3?
b. O€™Leary incurred direct materials cost 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. O€™Leary 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 O€™Leary to bid on a job to be completed in year 4. O€™Leary estimates that the job will require about $92,500 in direct materials and 5,000 direct labor-hours. Because of the economy, O€™Leary expects demand for their 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. O€™Leary estimates that there would be virtually no sales or administrative costs associated with this job.
What is the minimum amount O€™Leary can bid on the job and still not incur aloss?

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Year 1 Year 2 Direct labor-hours worked. Manufacturing overhead costs incurred 69,000 54,000 Employee benefits 810,000 540,000 522,000 138,000 656,250 1,982,500 1,982,500 751,250 $8,625,000 $7,560,000 1,035,000 690,000 552,000 138,000 716,250 Power Heat and light. . . Supervision-..-- - ciation. . . . Property taxes and insurance 751,250 Total manufacturing overhead costs. Job MC-270 Job MC-275 Direct material costs Direct labor-hours $270,000 $495,000 .. .. 2,500 hours 3,200 hours MC-389 $43,200 $67,000 $103,500 $28,900 Finished Finished n progress In progress MC-390 MC-397 MC-399 Direct materials Direct labor-hours. _ _ _. _. .1,740 hours 2,700 hours 6,100 hours 1,300 hours Job status