3-21 Predetermined Overhead Rate; Disposition of Underapplied or Overapplied Overhead [LO1, LO7] Savallas Company is highly automated and uses computers to control manufacturing operations. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of computer-hours. The following estimates were used in preparing the predetermined overhead rate at the beginning of the year: Computer-hours 80,000 Fixed manufacturing overhead cost $ 1,271,000 Variable manufacturing overhead per computer-hour $ 3.20 During the year, a severe economic recession resulted in cutting back production and a buildup of inventory in the company