Gold Nest Company of Guandong, China, is a family-owned enterprise that makes birdcages for the South China market. The company sells its birdcages through an extensive network of street vendors who receive commissions on their sales. All of the companys transactions with customers, employees, and suppliers are conducted in cash; there is no credit.

The company uses a job-order costing system in which overhead is applied to jobs on the basis of direct labor cost. Its predetermined overhead rate is based on a cost formula that estimated $85,000 of manufacturing overhead for an estimated activity level of $50,000 direct labor dollars. At the beginning of the year, the inventory balances were as follows:

Raw materials	$	10,600
Work in process	$	4,200
Finished goods	$	8,300

During the year, the following transactions were completed:

a.	Raw materials purchased for cash, $165,000.
b.	Raw materials requisitioned for use in production, $146,000 (materials costing $126,000 were charged directly to jobs; the remaining materials were indirect).
c.	Costs for employee services were incurred as follows:

Direct labor	$	169,000
Indirect labor	$	204,800
Sales commissions	$	26,000
Administrative salaries	$	41,000

d.

Rent for the year was $18,600 ($13,600 of this amount related to factory operations, and the remainder related to selling and administrative activities).

e.

Utility costs incurred in the factory, $16,000.

f.

Advertising costs incurred, $13,000.

g.

Depreciation recorded on equipment, $24,000. ($18,000 of this amount was on equipment used in factory operations; the remaining $6,000 was on equipment used in selling and administrative activities.)

h.

Manufacturing overhead cost was applied to jobs, $?

i.

Goods that had cost $229,000 to manufacture according to their job cost sheets were completed.

j.

Sales for the year totaled $516,000. The total cost to manufacture these goods according to their job cost sheets was $218,000.

2.

Prepare T-accounts for inventories, Manufacturing Overhead, and Cost of Goods Sold. Post relevant data from your journal entries to these t-accounts (dont forget to enter the beginning balances in your inventory accounts). (Round your intermediate calculations to 2 decimal places.)

Is Manufacturing Overhead underapplied or overapplied for the year?

3-a.

Is Manufacturing Overhead underapplied or overapplied for the year?

	Overapplied
	Underapplied