1.Compute the companys predetermined overhead rate for the year

Y= a + bX

where,

Y = The estimated total manufacturing overhead cost

a = The estimated total fixed manufacturing overhead cost

b = The estimated variable manufacturing overhead cost per unit of the allocation base

X = The estimated total amount of the allocation base

Y=$1,279,000 + $3.30 x 90,000 =$1,576,000

=$1,576,000 / 90,000 = $17.51

2.Compute the underapplied or overapplied overhead for the year

Applied = 40,000 x 17.51 = $700,400

Actual Overhead = $756,000

Under applied overhead cost = $756,000 $700,400 = $55,600

3.Assume the company closed any underapplied or overapplied overhead directly to cost of goods sold. Prepare the appropriate entry

Debit Cost of Goods Sold: $55,600

Credit Manufacturing Overhead $55,600

Predetermined Overhead Rate; Disposition of Underapplied or Overapplied Overhead [LQ2-1, LQ2-7] Luzadis Company makes furniture using the latest automated technology. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of machine-hours. The following estimates were used in preparing the predetermined overhead rate at the beginning of the year: During the year, a glut of furniture on the market resulted in cutting back production and a buildup of furniture in the company's warehouse. The company's cost records revealed the following actual cost and operating data for the year: Required: Compute the company's predetermined overhead rate. Compute the underapplied or overapplied overhead. Assume that the company closes any underapplied or overapplied overhead directly to Cost of Goods Sold. Prepare the appropriate journal entry