Savallas Company is highly automated and 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 Fixed manufacturing overhead cost Variable manufacturing overhead per computer-hour 85,000 $1,275,000 $3.00 During the year, a severe economic recession resulted in cutting back production and a buildup of inventory in the company's warehouse. The company's cost records revealed the following actual cost and operating data for the year: Computer-hours Manufacturing overhead cost Inventories at year-end 60,000 $1,350,000 Raw materials Work in process Finished goods Cost of goods sold $ 400,000 $ 160,000 $1,040,000 $2,800,000