2. Baba Company is a manufacturing firm that uses job-order costing. The company's inventory balances were as follows at the beginning and end of the year:

		Beginning Balance	Ending Balance
	Raw materials....................	$22,000	$25,000
	Work in process.................	$52,000	$34,000
	Finished goods..................	$121,000	$136,000

The company applies overhead to jobs using a predetermined overhead rate based on machine-hours. At the beginning of the year, the company estimated that it would work 40,000 machine-hours and incur $200,000 in manufacturing overhead cost. The following transactions were recorded for the year:

Raw materials were purchased, $412,000.

Raw materials were requisitioned for use in production, $409,000 $(342,000 direct and $67,000 indirect).

The following employee costs were incurred: direct labor, $314,000; indirect labor, $67,000; and administrative salaries, $129,000.

Selling costs, $135,000.

Factory utility costs, $25,000.

Depreciation for the year was $102,000 of which $90,000 is related to factory operations and $12,000 is related to selling, general, and administrative activities.

Manufacturing overhead was applied to jobs. The actual level of activity for the year was 44,000 machine-hours.

Sales for the year totaled $1,198,000.

Required:

a.Was the overhead underapplied or overapplied? By how much?

b.Prepare the Journal Entry to close out the over/under applied manufacturing overhead directly to Cost of Goods Sold

c.What two additional accounts would be used if you allocated the manufacturing overhead vs directly adjusting it to COGS.