Custer Products manufactures garden tools. It uses a job costing system that allocates factory overhead on the basis of direct labor-costs. Budgeted factory overhead for the year 2018 was $558,000, and management budgeted $372,000 in direct labor costs. The companys tax rate is 21% (Round income tax to the nearest dollar).

The trial balance of Custer Products, Inc. on April 30 is as follows:

Cash $23,000

Accounts Receivable.. 67,000

Finished Goods.. 101,000

Work in Process. 30,000

Materials 17,000

Prepaid factory Insurance..... 7,000

Machinery and Equipment (cost) 264,000

Accumulated Depreciation $70,000

Accounts Payable.. 97,000

Common Stock. 200,000

Retained Earnings 142,000

Total $509,000 $509,000

During May, the following transactions took place:

May 1. Purchased raw materials for $45,000 and factory supplies for $3,000 on account. (Record materials and supplies in the materials control account)

2. Received a $50,000 loan from First National Bank to be repaid in 5 years.

3. Declared a $1,500 cash dividend. 3. Issued raw materials to production, $52,000

5. Paid factory utility bill, $10,230 in cash.

15. Received a bill for Mays janitorial services, $4,500. This amount has not yet been paid.

16. Used factory supplies costing $1,000. (Indirect manufacturing cost).

20. Incurred research & development expense on account, $6,000.

22. Paid other factory overhead costs, $12,500.

23. Incurred selling and administrative expenses on account, $13,250.

28. Paid cash dividend, $1,500.

25. Incurred payroll costs of $45,000 (not yet paid). Of this amount, $30,000 were direct labor costs and $15,000 indirect labor cost.

27. Incurred restructuring costs totaling $15,000 on account.

28. Prepaid factory insurance expired, $1,750.

28. Paid payroll costs, $45,000.

30. Record depreciation for May. Depreciation rate is 10% per annum on the cost of machinery and equipment. One-fifth of this depreciation is for office equipment and the remainder is for factory machinery and equipment.

30. Allocate manufacturing overhead costs to production on the basis of direct labor costs.

31. Completed and transferred goods with a total cost of $95,000 to the finished goods storeroom.

31. Sold goods costing $200,000 for $374,000. (Assume all sales were made on account).

31. Paid accounts payable totaling, $158,000

31. Collected accounts receivable in the amount of $320,000.

31. Accrue $400 interest expense.

31. Calculate the overallocated or underallocated overhead and close this amount to the Cost of Goods Sold account.

Required

1. Compute the companys factory overhead allocation rate for the year.

2. Prepare a trial balance for May.

3. Prepare a multiple-step income statement and a classified balance sheet for May.