Question 2: Job Costing ACT Manufacturing Ltd. is highly automated company that uses computers to control manufacturing operations. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of computer-hours. The following estimates were used in preparing the predetermined overhead rate at the beginning of the year Computer-hours 85,000 Manufacturing overhead cost $1,530,000 The company's cost records revealed the following actual cost and operating data for the year: Computer-hours 60,000 Manufacturing overhead cost $1,350,000 Inventories at year-end: Raw materials $600,000 Work in process $230,000 Finished goods $ 1.756,000 Cost of goods sold $2,800,000 Required a) What is ACT Manufacturing Ltd's predetermined overhead rate for the year? b) Calculate the company's underapplied or overapplied overhead for the year. c) Assume that overapplied or underapplied overhead allocated on a pro rata basis to the ending balances in work in process, finished goods and cost of sales. The ending balance of these accounts are reported below. Prepare journal entries to show the allocation. Work in process $43,200 Finished goods $280,000 Cost of Goods Sold $ 756,000 d) How much higher or lower will net operating income be for the year if the underapplied or overapplied overhead is allocated on a pro rata basis rather than closed directly to Cost of Goods Sold? Explain the reason for this difference