You are the accountant for Mon Inc., a manufacturer of automobiles. Mon Inc. applies overhead using a pre-determined overhead rate based on direct labour hours.

At the beginning of the year, manufacturing overhead was estimated to be $900,000, machine hours were estimated to be 150,000 hours, and direct labour hours were estimated to be 750,000.

By the end of the year, the company actually used 148,000 machine hours, 741,000 direct labour hours, and incurred $863,000 in manufacturing overhead costs.

Part 1 Compute the companys pre-determined overhead rate (round two decimal places) [1]

Part 2 Determine the amount and indicate if the overhead is under-applied or over-applied for the period.[2] [3]

Part 3 How will the adjustment to fix the under-applied or over-applied overhead from Part 2 impact net income? (Increase or Decrease?) [4]