Problem 3-12 (Algo) Predetermined Overhead Rate; Disposing of Underapplied or Overapplied Overhead [LO3-4] Luzadis Company makes furniture using the latest automated technology. The company uses ajoborder costing system and applies manufacturing overhead cost to products on the basis of machine-hours. The predetermined overhead rate was based on a cost formula that estimates $1,332,000 of total manufacturing overhead for an estimated activity level of 74,000 machinehours. During the year, a large quantity of furniture on the market resulted in cutting back production and a buildup of furniture in the company's warehouse. The company's cost records revealed the following actual cost and operating data for the year: Machinehours 62 , 000 Manufacturing overhead cost 5 1,300,000 Inventories at yearend: Raw materials 5 20,000 Work in process (includes overhead applied of $100,440) $ 176,400 Finished goods (includes overhead applied of $223,200) $ 392,000 Cost of goods sold (includes overhead applied of $792,360) 5 1,391,600 Required: 1. Compute the underapplied or overapplied overhead. 2. Assume that the company closes any underapplied or overapplied overhead to Cost of Goods Sold. Prepare the appropriatejournal 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 appropriate journal entry. 4. How much higher or lower will net operating income be if the underapplied or overapplied overhead is allocated to Work in Process, Finished Goods, and Cost of Goods Sold rather than being closed to Cost of Goods Sold? Complete this question by entering your answers in the tabs below. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Compute the underapplied or overapplied overhead. Underapplied overhead cost Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Assume that the company closes any underapplied or overapplied overhead to Cost of Goods Sold. Prepare the appropriate journal entry. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet Record the entry to close the balance in the manufacturing overhead account to the cost of goods sold account. Note: Enter debits before credits. Record entry Clear entry View general journal Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Assume that the company allocates any underapplied or overapplied overhead proportionally to Work in Process, Finished Goods, and Cost of Goods Sold. Prepare the appropriate journal entry. (If no entry is required for a transaction/event, select "No journal entry required" in the rst account eld.) View transaction list Journal entry worksheet Record the allocation of the underapplied/overapplied overhead to various accounts. Note: Enter debits before credits. Record entry Clear entry View general journal Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 How much higher or lower will net operating income be if the underapplied or overapplied overhead is allocated to Work in Process, Finished Goods, and Cost of Goods Sold rather than being closed to Cost of Goods Sold?