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Luzadis Company makes furnture using the latest automated technology. The company uses a job-order costing system and applies manufacturing ovethead cost to products on the
Luzadis Company makes furnture using the latest automated technology. The company uses a job-order costing system and applies manufacturing ovethead cost to products on the basis of machine-hours. The predetermined overhead rate was based on a cost formul o that estimates $612,000 of total manufacturing ovehhead for an estimated activity level of 68,000 machine-hours During the yeat, a large quantity of fuiniture on the market resulted in cutting back production and a buldup of fumliture in the comnanu's warehouse. The company's cost records revealed the following actual cost and operating data for the year: Required: 1. Compute the undesapplied or overapplied overnead 2. Assume that the company closes any underopplied of overapplied overhead to Cost of Goods Sald. Prepare the appropriate journal entry. 3. Assume that the company allocates any underapplied or overapplied overhead proportionally to Work in Process, Finished Goods, and Cost of Goods Sold. Prepare the oppropriate joumal entry 4. How much higher or lower wif net operating income be if the underapplied or overapplied overhead is ahocated to Work in Process. Finished Goods, and Cost of Goods Sold rather than being closed to Cost of Goods Sold
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