Gandars Associates produces carburetors for small engines and uses a normal costing system. The following data are available for 2006: Budgeted: Overhead Machine hours Direct labor hours Actual: Units produced Overhead $4,500,000 187,500 600,000 750,000 $4,466,250 $6,750,000 Prime costs Machine hours Direct labor hours 187,875 585,000 Overhead is applied on the basis of direct labor hours. Required 1. What is the predetermined overhead rate? 2. What is the applied overhead for 2006? 3. Was overhead overapplied or underapplied, and by how much? 4. What is the unit cost for the year? Using the information from Exercise 4-3, suppose Gandars Associates applies oven head to production on the basis of machine hours instead of direct labor hours. Required 1. What is the predetermined overhead rate? 2. What is the applied overhead for 2006? 3. Is overhead overapplied or underapplied, and by how much? 4. What is the unit cost? 5. How can Gandars Associates decide whether to use direct labor hours or machine hours as the basis for applying overhead?