Exercise 1 Bulls Company is a manufacturing firm that uses job-order costing. The company's inventory balances were as follows at the beginning and end of the year: Raw materials Work in process Finished goods. Beginning Balance Ending Balance $26,000 $20,000 $71,000 $66,000 $53,000 $81,000 The company applies overhead to jobs using a predetermined overhead rate based on machine-hours. At the beginning of the year, the company estimated that it would work 44,000 machine-hours and incur $176,000 in manufacturing overhead cost. The following transactions were recorded for the year: Raw materials were purchased, $459,000. Raw materials were requisitioned for use in production, $465,000 ($431,000 direct and $34,000 indirect). The following employee costs were incurred: direct labor, $296,000; indirect labor, $63,000; and administrative salaries, $157,000. Selling costs, $134,000. Factory utility costs, $14,000. Depreciation for the year was $119,000 of which $114,000 is related to factory operations and $5,000 is related to selling and administrative activities. Manufacturing overhead was applied to jobs. The actual level of activity for the year was 47,000 machine- hours. Sales for the year totaled $1,287,000 Required: a. Was the overhead under- or overapplied? By how much? b. Prepare an income statement for the year in good form. The company closes any under- or overapplied overhead to Cost of Goods Sold.