E3-4A. Applied vs. Actual Manufacturing Overhead Davis Manufacturing Corporation applies manufac-

turing overhead on the basis of 150% of direct labor cost. An analysis of the related accounts and job

order cost sheet indicates that during the year total manufacturing overhead incurred was $315,000

and that at year-end Work in Process Inventory, Finished Goods Inventory, and Cost of Goods Sold

included $40,000, $20,000, and $140,000, respectively, of direct labor incurred during the current

year.

a. Determine the underapplied manufacturing overhead at year-end (assume it is significant).

b. Prepare a journal entry to record the disposition of the underapplied manufacturing overhead