Problem - Ravsten Company uses a job-order costing system.
The company applies overhead cost to jobs on the basis of machine-hours. For the current year, the company estimated that it would work 31,000 machine-hours and incur $156,550 in manufacturing overhead cost. The following transactions occurred during the year:
a. Raw materials requisitioned for use in production, $305,000 (80% direct and 20% indirect).
b. The following costs were incurred for employee services:
Direct labor$176,000 Indirect labor$34,000 Sales commissions$26,000 Administrative salaries$41,000
c. Heat, power, and water costs incurred in the factory, $70,000.
d. Insurance costs, $26,000 (90% relates to factory operations, and 10% relates to selling and administrative activities).
e. Advertising costs incurred, $66,000.
f. Depreciation recorded for the year, $76,000 (85% relates to factory operations, and 15% relates to selling and administrative activities).
g. The company used 56,000 machine-hours during the year.
h. Goods that cost $496,000 to manufacture according to their job cost sheets were transferred to the finished goods warehouse.
i. Sales for the year totaled $732,000. The total cost to manufacture these goods according to their job cost sheets was $491,000.
Required: Determine the underapplied or overapplied overhead for the year.