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 costs of $59,200 and used an additional 520 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?
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
| Year 1 | Year 2 | ||||
| Direct labor-hours worked | 69,200 | 56,200 | |||
| Manufacturing overhead costs incurred | |||||
| Indirect labor | $ | 2,848,000 | $ | 2,248,000 | |
| Employee benefits | 1,038,000 | 843,000 | |||
| Supplies | 692,000 | 562,000 | |||
| Power | 649,000 | 544,000 | |||
| Heat and light | 142,400 | 142,400 | |||
| Supervision | 782,630 | 662,850 | |||
| 2,048,500 | 2,048,500 | ||||
| Property taxes and insurance | 795,470 | 817,250 | |||
| Total manufacturing overhead costs | $ | 8,996,000 | $ | 7,868,000 | |
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. For the purpose of computing the predetermined overhead rate, O’Leary uses the previous year’s actual overhead rate. Data on direct material costs and direct labor-hours for these jobs in year 2 follow.
| Job MC-270 | Job MC-275 | |||||
| Direct material costs | $ | 272,200 | $ | 497,200 | ||
| Direct labor-hours | 2,610 | hours | 3,310 | hours | ||
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 | $ | 11,842,200 |
| Direct labor-hours | 76,200 | |
| Actual manufacturing overhead | $ | 9,648,000 |
At the end of year 3, there were four jobs that had not yet shipped. Data on these jobs follow.
| MC-389 | MC-390 | MC-397 | MC-399 | |
| Direct materials | $45,400 | $69,200 | $105,700 | $31,100 |
| Direct labor-hours | 1,762 hours | 2,810 hours | 6,210 hours | 1,410 hours |
| Job status | Finished | Finished | In progress | In progress |
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 costs of $59,200 and used an additional 520 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
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 $93,600 in direct materials and 5,110 direct labor-hours. Because of the economy, O’Leary expects demand for its 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 a loss?
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