On January 1, the Knicks Company determined that the estimated manufacturing overhead cost for 2017 will be $2,000,000. They also estimated that they will use 100,000 direct labor hours for their production process for 2017. On December 31, 2017, they must determine if they are in an over/under applied position with regards to their overhead. The review of all the Job Costing Sheets from the year reveals that their allocation base totals (Direct Labor Hours Used) were equal to their projections. The actual manufacturing overhead costs was $1,500,000

Additional Data for 2016:

Sales 10,000,000

Depreciation Expense, Office Equipment $ 20,000

Depreciation Expense, Factory Equipment 80,000

Supplies, Factory 1,000

Maintenance, Factory Equipment 20,000

Utilities, Factory 5,000

Executive Salaries 100,000

Indirect Labor 50,000

Rent, Factory Buildings 70,000

Rent Corporate Headquarters 100,000

Additional Raw Materials Purchased 112,000

Direct Labor Cost 70,000

Advertising Expense 60,000

Beginning Work-in-Process 5,000

Ending Work-in-Process 15,000

Beginning Finished Goods 60,000

Ending Finished Goods 20,000

Beginning Raw Material Inventory 30,000

Ending Inventory of Raw Materials 10,000

Added Raw Materials Purchased 50,000

1. 1. Determine the Pre-Determined Overhead Rate used by the firm during the 2017. Accounting Cycle.
2. 2. Compute the amount of under or over applied overhead at the end of the year, if any, and note if it is under or over.