Sallie Company applies factory overhead on the basis of a rate per direct labor-hour. The company provides you with the following data for the month of May 19X1. Selected inventories have the following balances:

Sales have increased 20 percent over April’s net sales of $500,000; as a result, gross margin for May is $190,000. Actual factory overhead for May is $58,100.
Required:

a. Prepare a cost of goods manufactured statement showing only applied factory overhead.
Also prepare a formal income statement.

b. Determine the factory overhead application rate.

c. Determine the amount of over- or underapplied overhead.

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May 1 May 31 Work in process Finished goods. $78,000 $85,000 81,000 60,000 Prime costs for the month were: Direct material used.... Direct labor (45,000 actual labor-hours). 48,000 294,000