k ces Problem 3-12 (Algo) Predetermined Overhead Rate; Disposing of Underapplied or Overapplied Overhead [LO3-4] Luzadis Company makes furniture using the latest automated technology. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of machine-hours. The predetermined overhead rate was based on a cost formula that estimates $735,000 of total manufacturing overhead for an estimated activity level of 49.000 machine-hours. During the year, a large quantity of furniture on the market resulted in cutting back production and a buildup of furniture in the company's warehouse. The company's cost records revealed the following actual cost and operating data for the year: Machine-hours Manufacturing overhead cost Inventories at year-end: Raw materials Work in process (includes overhead applied of $60,000) Finished goods (includes overhead applied of $102,000) Cost of goods sold (includes overhead applied of $438,000) 40,000 $ 693,000 $ 20,000 $ 185,000 S 314,500 $ 1,350,500