Problem 3-12 Predetermined Overhead Rate; Disposing of Underapplied or Overapplied Overhead [LO3-4] 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 predetermined overhead rate was based on a cost formula that estimates $1,615,000 of total manufacturing overhead for an estimated activity level of 85,000 machine-hours. During the year, a large quantity 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 77,000 Manufacturing overhead cost $ 1,574,000 Inventories at year-end: Raw materials $ 14,000 Work in process (includes overhead applied of $73,150) $ 94,000 Finished goods (includes overhead applied of $277,970) $ 357,200 Cost of goods sold (includes overhead applied of $1,111,880) $ 1,428,800 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 appropriate journal entry. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) 3. Assume that the company allocates any underapplied or over appliedoverhead 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 first account field.) 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?

Help Save &Exit Submit Check my work 2 Problem 3-12 Predetermined Overhead Rate; Disposing of Underapplied or Overapplied Overhead [L03 4] 10 points 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 predetermined overhead rate was based on a cost formula that estimates $1,615,000 of total manufacturing overhead for an estimated activity level of 85,000 machine-hours. eBook 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: Print References Machine-hours Manufacturing overhead cost Inventories at year-end: 77,000 1,574,000 Raw materials Work in process (ineludes overhead applied of $73,150) Pinished goods includes overhead applied of $277,970) $14,000 $94,000 $357,200 1,428,800 Cost of goods sold (includes overhead applied of 1,111,880) 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 appropriate journal entry. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) 3. Assume that the company allocates any underapplied or over appliedoverhead 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 first account field.) 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