e e R T Luzadis Company makes furniture using the latest automated technology. The company uses a job-order costing system and applies manufacturing overhead cost to products based on machine-hours. The predetermined overhead rate was based on a cost formula that estimates $1,520,000 of total manufacturing overhead for an estimated activity level of 76,000 machine-hours. During the year, a large quantity of furniture on the market caused Luzadis to cut production and build inventories. The company _provided the following data for the year: Machine-hours 64,000 - Manufacturing overhead cost $ 1,471,000 Inventories at year-end: | Raw materials $ 14,000 Work in process (includes overhead applied of $64,000) $ 90,500 ~ Finished goods (includes overhead applied of $204,800) $ 289,600 ~ Cost of goods sold (includes overhead applied of $1,011,200) $ 1,429,900 Required: 1. Compute the underapplied or overapplied overhead. 2. Assume the company closes underapplied or overapplied overhead to Cost of Goods Sold. Prepare the appropriate journal entry. 3. Assume the company allocates underapplied or overapplied overhead proportionally to Work in Process, Finished Goods, and Cost of Goods Sold. Prepare the appropriate journal entry. 4. How much higher or lower will net operating income be if the underapplied or overapplied overhead is allocated to Work in Process, Finished Goods, and Cost of Goods Sold rather than being closed to Cost of Goods Sold? E L A S 3 R St