Alderberry Recording Inc. is a small audio recording studio. The company handles work for advertising agencies-- primarily for radio ads--and has a few singers and bands as clients. Alderberry Recording handles all aspects of recording, from editing to making a digital master from which CDs can be copied. The competition in the audio recording industry has always been tough, but it has been getting even tougher over the last several years. The studio has been losing customers to newer studios that are equipped with more up-to-date equipment and are able to offer very attractive prices and excellent service. Summary data concerning the last two years of operations follow: 2013 2014 Estimated hours of studio service 1,000 750 Estimated studio overhead cost $90,000 $90,000 Actual hours of studio service 900 600 provided Actual studio overhead cost $90,000 $90,000 incurred Hours of studio service at 1,800 1,800 capacity The company applies studio overhead to recording jobs on the basis of the hours of studio service provided. For example, 30 hours of studio time were required to record, edit, and master the Fire music CD for a local band. All of the studio overhead is fixed, and the actual overhead cost incurred was exactly as estimated at the beginning of the year in both 2013 and 2014 Required: 1. Alderberry Recording computes its predetermined overhead rate at the beginning of each year based on the estimated studio overhead and the estimated hours of studio service for the year. How much overhead would have been applied to the Fire job if it had been done in 2013? In 2014? By how much would overhead have been underapplied or overapplied in 2013? In 2014? 2013 2014 Overhead applied to the Fire job Underapplied overhead Overapplied overhead 2. The president of Alderberry Recording has heard that some companies in the industry have changed to a system of computing the predetermined overhead rate at the beginning of each year based on the estimated studio overhead for the year and the hours of studio service that could be provided at capacity. He would like to know what effect this method would have on job costs. How much overhead would have been applied using this method to the Fire job if it had been done in 2013? In 2014? By how much would overhead have been underapplied or overapplied in 2013 using this method? In 2014? 2013 2014 Overhead applied to the Fire job Underapplied overhead Overapplied overhead