Salvo Company manufactures products to customer

Salvo Company manufactures products to customer specifications; a job-order system is used to accumulate costs in the company’s plant. On July 1, 2020, the start of Salvo Company’s fiscal year, inventory balances were as follows:

Raw materials $25,000

Work in Process 10,000

Finished Goods 40,000

The company applies overhead cost to jobs on a basis of machine-hours of operation time. For the fiscal year starting July 1, 2020, it was estimated that the plant would operate at 45,000 machine-hours and incur $270,000 in manufacturing overhead cost. During the year, the following transactions were completed:

1. Raw materials purchased on account, $275,000.
2. Raw materials requisitioned for use in production, $280,000 (materials costing $220,000 were chargeable directly to jobs; the remaining materials were indirect).
3. Costs for employee services were incurred as follows:

Direct factorylabour $180,000

Indirect factorylabour 72,000

Sales Commissions 63,000

Administrative salaries 90,000

4. Prepaid insurance expired during the year, $18,000 ($13,000 of this amount related to factory operations, and the remainder related to selling and administrative activities).
5. Utility costs incurred in the factory, $57,000.
6. Advertising costs incurred, $140,000.
7. Depreciation recorded on equipment, $100,000. (Some $88,000 of this amount was on equipment used in factory operations; the remaining $12,000 was on equipment used in selling and administrative activities.)
8. Manufacturing overhead cost was applied to production. The company recorded 50,000 machine-hours of operating time during the year.
9. Goods costing $675,000 to manufacture were transferred into the finished goods warehouse.
10. Sales (all on account) to customers during the year totaled $1,250,000. These goods had cost $700,000 to manufacture.

Required:

1. Prepare journal entries to record the above transactions for the year (use letters instead of dates to identify your transactions)
2. Prepare a journal entry that is required for the over/under applied manufacturing overhead.