S2-3 Comprehensive Job Order Costing CaseSampson Company uses a job order cost system with overhead applied to products based on directlabor hours. Based on previous history, the company estimated its total overhead for the comingyear (2009) to be $240,000 and its total direct labor hours to be 6,000.On January 1, 2010, the general ledger of Sampson Company revealed that it had one jobin process (Job 102) for which it had incurred a total cost of $15,000. Job 101 had been finishedthe previous month for a total cost of $30,000 but was not yet sold. The company had a contractfor Job 103 but had not started working on it yet. Other balances in Raw Materials Inventory andother assets, liabilities, and owner’s equity accounts are summarized here:assets, liabilities, and owner’s equity accounts are summarized here:SAMPSON COMPANYGeneral Ledger AccountsRaw Materials Inventory1/1 Balance 10,000Sales RevenueCash and Other Assets1/1 Balance 100,000Work in Process Inventory (WIP)1/1 Balance 15,000Cost of Goods SoldSelling and Administrative ExpensesPayables and Other Liabilities85,000 1/1 BalanceStockholder’s Equity70,000 1/1 BalanceIndividual Job Cost Sheets (subsidiary ledgers to WIP)Job 102 Job 103Beg. Balance 15,000 — Direct Materials Direct Labor Applied OHTotal Mfg. CostManufacturing OverheadFinished Goods Inventory1/1 Balance 30,000During January, the company had the following transactions:( a ) Purchased $10,000 worth of raw materials on account.( b ) Issued the following materials into production:Item Cost ExplanationDirect materials $7,000 Job 102, $2,000; Job 103, $5,000Indirect materials 2,000 Used on both jobsTotal materials issued $9,000( c ) Recorded salaries and wages payable as follows:Item Cost ExplanationDirect labor $10,000 Job 102, $6,000; Job 103, $4,000Indirect labor 4,000 For factory supervisionSalaries 5,000 For administrative staffTotal payroll cost $19,000( d ) Applied overhead to jobs based on the number of direct labor hours required:Job Number Direct Labor HoursJob 102 300 hoursJob 103 200 hoursTotal 500 hours( e ) Recorded the following actual manufacturing costs:Item Cost ExplanationRent $ 6,000 Paid factory rent in cashDepreciation 5,000 Factory equipmentInsurance 3,000 Had one month of factory insurance policy expireUtilities 2,000 Received factory utility bill but did not pay itTotal cost $ 16,000( f ) Recorded the following general and administrative costs:Item Cost ExplanationAdvertising $ 2,000 Advertising paid in cashDepreciation 3,000 Office equipmentOther expenses 1,000 Micellaneous expenses incurred but not paidTotal cost $ 6,000( g) Sold Job 101, which is recorded in Finished Goods Inventory at a cost of $30,000, for $55,000.( h ) Completed Job 102 but did not sell it; Job 103 is still in process at year-end.Required:1. Compute and interpret the predetermined overhead rate.2. How much overhead would be applied to jobs during the period?3. Compute the total cost of Jobs 102 and 103 at the end of the period. Where would the costof each of these jobs appear on the year-end balance sheet?4. Prepare journal entries to record the January transactions and post the entries to the generalledger T-accounts given earlier in the problem.5. Calculate the amount of over- or underapplied overhead.6. Prepare the journal entry to dispose of the overhead balance assuming that it had beena year-end balance instead of a month-end balance. Post the effect to the general ledgerT-accounts.7. Prepare a statement of cost of goods manufactured and sold report including the adjustmentfor over- or underapplied overhead.8. Prepare a br ief i ncome s tatement f or S ampson C ompany.