Absorption Costing Q4. Michael Klein started Design T-Shirts Ltd. about a year ago. The company currently uses a normal job order costing system. Each job represents an order from a customer. Customers typically provide specific designs for each order of T shirts. In the month of October 2017, Calvin received the following summary report from the job cost sheets. The direct labor rate was $25 per hour. Factory overhead was applied at the rate of $15 per direct labor hour. Actual factory overheads in October were $20,000. Beginning Inventories: Direct Materials $32,000 Work in Process (Job #521) Finished Goods (Job #500) $23,000 $25,000 Materials Purchased $45,000 Materials Issued to Production: Direct Materials: Job #521 $12,000 Job #522 $14,000 Job #523 $15,000 Factory Labor Costs: Direct Labor: Job #521 $13,000 Job #522 $17,000 Job #523 $9,000 Other Operating Costs Incurred: Selling and Administrative Expenses $12,820 Jobs #521 and #522 were completed in October. Job#500 and 1,000 of the 10,000 T-shirts in Job #521 were sold for a total sales value of $100,000. The company applies the direct method to close out the over- or under-applied factory overheads against Cost of Goods Sold. 1) Calculate over- or under-applied overheads: 2) Calculate cost of goods sold before adjustment 3) Calculate net operating income after adjusting for the over- or under-applied overheads: