Medusa Products uses a job$-$order costing system. Overhead costs are applied to jobs on the basis of machine$-$hours. At the beginning of the year, management estimated that $85,000$ machine$-$hours would be required for the period's estimated level of production. The company also estimated $$106,250$ of fixed manufacturing overhead expenses for the coming period and variable manufacturing overhead of $$0\mathrm{.}75$ per machine$-$hour.

Required:

$1.$ Compute the company's predetermined overhead rate.

$2.$ Assume that during the year the company actually works only $80,000$ machine$-$hours and incurs the following costs in the Manufacturing Overhead and Work in Process accounts:

Copy the data in the T$-$accounts above onto your answer sheet. Compute the amount of overhead cost that would be applied to Work in Process for the year, and make the entry in your T$-$accounts.

$3.$ Compute the amount of underapplied or overapplied overhead for the year, and show the balance in your Manufacturing Overhead T$-$account. Prepare a journal entry to close out the balance in this account to Cost of Goods Sold.

$4.$ Explain why the manufacturing overhead was underapplied or overapplied for the year.