The Daniels Tool & Die Corporation has been in existence for a little over three years. The companys sales have been increasing each year as it builds a reputation. The company manufactures dies to its customers specifications and therefore uses a job-order cost system. Factory overhead is applied to the jobs based on direct labour hoursthe absorption-costing (full) method. Overapplied or underapplied overhead is treated as an adjustment to Cost of Goods Sold. The companys income statements and other data for the last two years are as follows: DANIELS TOOL & DIE CORPORATION 20152016 Comparative Income Statements 2015 2016 Sales $833,200 $1,015,800 Cost of goods sold Finished goods, January 1 24,900 17,800 Cost of goods manufactured 541,000 652,600 Total available 565,900 670,400 Finished goods, December 31 17,800 14,000 Cost of goods sold before overhead adjustment 548,100 656,400 Underapplied factory overhead 35,100 14,000 Cost of goods sold 583,200 670,400 Gross profit 250,000 345,400 Selling expenses 81,600 94,300 Administrative expenses 69,800 74,000 Total operating expenses 151,400 168,300 Operating income $98,600 $177,100 Daniels Tool & Die Corporation Inventory Balances January 1, 2015 December 31, 2015 December 31, 2016 Raw material $22,000 $29,400 $10,200 Work in process $40,600 $48,000 $63,700 Direct labour hours (used in WIP) 1,330 1,660 2,310 Finished goods $24,900 $17,800 $14,000 Direct labour hours (used in FG) 1,420 1,010 830 Daniels used the same predetermined overhead rate in applying overhead to its production orders in both 2015 and 2016. The rate was based on the following estimates: Fixed factory overhead $24,880 Variable factory overhead $154,256 Direct labour hours (used in WIP) 24,880 Direct labour costs (used in FG) $149,280 In 2015 and 2016, the actual direct labour hours used were 20,300 and 23,300, respectively. Raw materials put into production were $291,700 in 2015 and $370,200 in 2016. The actual fixed overhead was $42,700 for 2015 and $27,840 for 2016, and the planned direct labour rate was the direct labour achieved. For both years, all of the administrative costs were fixed. The variable portion of the selling expenses results from a 5% commission that is paid as a percentage of the sales revenue.