Medusa Proucts 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 the company would work 85,000 machine-hours and incur $170,000 in manufactuering overhead costs for the year.

1. What is the company's predetermined overhead rate?

2. Compute the amount of underapplied or overapplied overhead for the year assuming the company actually worked only 80,000 machine hours and incurred $168,000 of manufacturing overhead costs.

3. Explain why the manufacturing overhead was underapplied or overapplied for the year?