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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
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 $900,000 of total manufacturing overhead for an estimated activity level of 75.000 machine-hours. During the year. a large quantityr 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 60.000 Manufacturing overhead cost $850,000 Inventories at year-end: Raw materials $30,000 Work in process (includes overhead applied of $36,000) $100,000 nished goods (includes overhead applied of$180,000) $500000 Cost of goods sold (includes overhead applied of $504,000) $l,400,000 Required: 1. Compute the underapplied or overapplied overhead
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