P4-17 Durnham Company uses a job-order costing system. The following transactions took place last year:

P4-17 Durnham Company uses a job-order costing system. The following transactions took place last year:

a. Raw materials requisitioned for use in production, $40,000 (80% direct and 20% indirect).

b. Factory utility costs incurred, $14,600.

c. Depreciation recorded on plant and equipment, $28,000. Three-fourths of the depreciation relates to factory equipment, and the remsinder relates to selling and administrative equipment.

d. Costs for salaries and wages incurred as follows:

Direct labor……………. $ 40,000

Indirect labor……….. 18,000

Sales commissions… 10,000

Administrative salaries 25,000

e. Insurance costs incurred, $3,000 (80% relates to factory operations, and 20% relates to selling and administrative activities).

f. Miscellaneous selling and administrative expenses incurred, $18,000.

g. Manufacturing overhead was applied to production. The company applies overhead on the basis of 150% of direct labor cost.

h. Goods that cost $130,000 to manufacture according to their job cost sheets were transferred to the finished goods warehouse.

i. Goods that had cost $120,000 to manufacture according to their job cost sheets were sold for $200,000.

REQUIRED:

1. Determine the underapplied or overapplied overhead for the year.

2. Prepare an income statement for the year. (HINT: No calculkations are required to determine the cost of goods sold before any adjustment for underapplied or overapplied overhead).