Problem 2-22A Predetermined Overhead Rate; Disposition of Underapplied or Overapplied Overhead [LO2-1, LO2-7]

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 following estimates were used in preparing the predetermined overhead rate at the beginning of the year:

Machine-hours		87,000
Fixed manufacturing overhead cost	$	1,278,000
Variable manufacturing overhead per computer-hour	$	3.40

During the year, a glut of furniture on the market resulted in cutting back production and a buildup of furniture in the companys warehouse. The companys cost records revealed the following actual cost and operating data for the year:

Machine-hours		50,000
Manufacturing overhead cost	$	968,000

Required:

1.	Compute the companys predetermined overhead rate for the year. (Round your answer to 2 decimal places.)

2.	Compute the underapplied or overapplied overhead for the year. (Round your intermediate calculations to 2 decimal places.)

3.	Assume the company closes any underapplied or overapplied overhead directly to Cost of Goods Sold. Prepare the appropriate entry. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate calculations to 2 decimal places.)