The following information is taken from the records of Cabot Cove Company. At the end of the year, Cabot Cove had only three jobs in process. Selected figures for these three jobs are:

Cabot Cove applies overhead using a budgeted rate based on direct labor dollars; the overhead application rate is calculated at the beginning of the year. Budgeted and actual figures for the most recent year were:

There were no inventories at the beginning of the year.

Required:
a. By how much was total overhead under-applied or over-applied?
b. What is the ending balance in the work-in-process account (without taking under or over-applied overhead amounts into account)?
c. Cabot Cove prorates under-applied or over-applied overhead to work in process, finished goods, and cost of goods sold. Compute the balances in these accounts after disposing of under-applied or over-applied overhead.
d. What would be the difference in income had the company chosen to write off the entire under-applied or over-applied overhead directly to cost of goodssold?

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Direct materials Direct labor Machine hours Direct labor hours Job 126 Job 130 Job 137 $10,000 $8,000 $38,000 $25,000 $15,000 $40,000 500 200 200 80 100 50 Budgeted total overhead Budgeted direct labor cost Actual direct labor cost Actual total overhead Finished goods inventory (at the end of the year) Cost of goods sold $600,000 $750,000 $900,000 $640,000 $300,000 $500,000