Kody Corporation uses a job-order costing system with a plantwide overhead rate based on machine-hours. At the beginning of the year, the company made the following estimates:

Machine-hours required to support estimated production		150,000
Fixed manufacturing overhead cost	$	750,000
Variable manufacturing overhead cost per machine-hour	$	4.00

Required:

1. Compute the predetermined overhead rate.

2. During the year Job 500 was started and completed. The following information was available with respect to this job:

Direct materials requisitioned	$	350
Direct labor cost	$	230
Machine-hours used		30

Compute the total manufacturing cost assigned to Job 500.

3-a. During the year the company worked a total of 147,000 machine-hours on all jobs and incurred actual manufacturing overhead costs of $1,325,000. What is the amount of underapplied or overapplied overhead for the year?

3-b. If this amount were closed out entirely to Cost of Goods Sold, would net operating income increase or decrease?

	Increase
	Decrease