Smith Company manufactures lawn mowers. The firm had the following inventories.

Jan 1, 2018 Dec 3, 2018

Finished goods $142,000 $ 92,000

Work in process $262,000 $426,000

Materials $114,000 $ 90,000

The following additional manufacturing data pertains to operations.

Material purchased $150,000 Property Taxes Factory $ 7,500

Direct labor $400,000 Utilities-Factory $15,000

Depreciation-Factory Equip $ 25,000 Insurance-Factory $ 4,500

Factory Supervisor Salaries $227,500 Selling and Admin Expense $200,000

Alex Company applies manufacturing overhead at the rate of 60 percent of direct-labor cost.

Required:

Compute the following amounts for the year of 2018.

-Was overhead under or over applied and by how much? -What effect, if any, will the amount in h have on net income. Explain and show the computation.