Luzadis Company makes furniture using the latest automatedtechnology. The company uses a job-order costing system and appliesmanufacturing overhead cost to products on the basis ofmachine-hours. The following estimates were used in preparing thepredetermined overhead rate at the beginning of the year:

Machine-hours		83,000
Fixed manufacturingoverhead cost	$	1,278,000
Variablemanufacturing overhead per computer-hour	$	3.50

During the year, a glut of furniture onthe market resulted in cutting back production and a buildup offurniture in the company’s warehouse. The company’s cost recordsrevealed the following actual cost and operating data for theyear:

Machine-hours		50,000
Manufacturing overhead cost	$	1,011,000
Inventories at year-end:
Raw materials	$	450,000
Work in process (includes overheadapplied of 56,700)	$	160,000
Finished goods (includes overheadapplied of 189,000)	$	1,010,000
Cost ofgoods sold (includes overhead applied of 699,300)	$	2,750,000

Required:

1.	Compute the company’s predetermined overhead rate for the year.(Round your answer to 2 decimal places.)

Predetermined overhead rate __________

       

2.	Compute the underapplied or overapplied overhead for the year.(Round your intermediate calculations to 2 decimalplaces.)

       

3.	Assume the company closes any underapplied or overappliedoverhead directly to Cost of Goods Sold. Prepare the appropriateentry. (If no entry is required for a transaction/event,select "No journal entry required" in the first account field.Round your intermediate calculations to 2 decimalplaces.)

       

4.

Assume that the company allocates any underapplied oroverapplied overhead to Work in Process, Finished Goods, and Costof Goods Sold on the basis of the amount of overhead applied duringthe year that remains in each account at the end of the year. Theseamounts are $56,700 for work in process, $189,000 for finishedgoods, and $699,300 for cost of goods sold. Prepare the journalentry to show the allocation for the year. (If no entry isrequired for a transaction/event, select "No journal entryrequired" in the first account field. Round your intermediatecalculations to 2 decimal places.)

       

5.	How much higher or lower will net operating income be for theyear if the underapplied or overapplied overhead is allocatedrather than closed directly to Cost of Goods Sold? (Roundyour intermediate calculations to 2 decimal places.)

  net operating income will be_____ if the___________