Acme Company uses a job costing system, and factory overhead is applied on the basis of machine hours. At the beginning of the year, management estimated that the company would incur $1,050,000 of factory overhead costs and use 70,000 machine hours. Acme Company recorded the following events during the month of March. (a) Purchased 200,000 pounds of materials on account. The cost was $4.00 per pound. (b) Issued 150,000 pounds of materials to production, of which 20,000 pounds were used as indirect materials. Assume all materials are at $4 per pound. (c) Incurred $250,000 of direct labor costs and $50,000 of indirect labor costs. (d) Recorded depreciation on equipment for the month, $18,000. (e) Recorded $4,000 of insurance costs for the manufacturing property. (f) Paid $8,000 cash for utilities and other miscellaneous items for the manufacturing plant. (g) Completed job M11 costing $17,000 and job M12 costing $80,000 during the month and transferred them to Finished Goods inventory account. (h) Shipped job M12 to the customer during the month. The job was invoiced at 40 percent above cost. (i) Used 10,000 machine hours during March. Required:
(1) Compute Acme Company's predetermined overhead rate for the year.
(2) Prepare journal entries to record the events that occurred during March.
(3) Compute the amount of overapplied or underapplied overhead and prepare a journal entry to close overapplied or underapplied overhead into cost of goods sold on March 31.