Company A uses a predetermined overhead rate of $18.20 per direct labor-hour. This predetermined rate was based on a cost formula that estimates $218,400 of total manufacturing overhead for an estimated activity level of $12,000 direct labor-hours.

The company actually incurred $215,000 of manufacturing overhead and 11,500 direct labor-hours during the period.

1. Determine the amount of underapplied or overapplied manufacturing overhead for the period. Show your work.

2. Assume the company's underapplied or overapplied overhead is closed to Cost of Good Sold. What would be the journal entry to Cost of Goods Sold? What effect will this have on the Income Statement?