5 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: During the year, a severe economic recession resulted in cutting back production and a buildup of inventory in the company's warehouse. The company's cost records revealed the following actual cost and operating data for the year: Required: How much higher or lower will net operating income be for the year if the underapplied or overapplied overhead is allocated rather than closed directly to Cost of Goods Sold? Computer-hours 85,000 Fixed manufacturing overhead cost $1275.000 Variable manufacturing overhead per computer-hour $3.00 During the year, a severe economic recession resulted in cutting back production and a buildup of inventory in the company's warchouse. The company's cost records revealed the follow- ing actual cost and operating data for the year 50.000 $1,350.000 Computer-hours Manufacturing overhead cost Inventories at year-end: Raw materials Work in process Finished goods Coat fonden $400.000 $160,000 $1.040,000 Annon