Use excel or word only. Provide all supporting calculations to show how you arrived at your numbers.

  

Use excel or word only. Provide all supporting calculations to show how you arrived at your numbers. 

Part B: Application of Job Order Costing

Scanlon Company has a job-order costing system and applies manufacturing overhead cost to products on the basis of machine-hours. The following estimates were used in preparing the predetermined overhead rate for the most recent year. 

  

Machine-hours    

95,000   

 

Manufacturing   overhead cost 

$1,710,000   

During the most recent year, a severe recession in the company’s industry caused a buildup of inventory in the company’s warehouses. The company’s cost records revealed the following actual cost and operating data for the year:

  

Machine-hours   

75,000   

 

Manufacturing   overhead cost 

$1,687,500   

 

Amount   of applied overhead in inventories at year-end: 

 

Work   in process 

$337,500   

 

Finished   goods.

$253,125   

 

Amount   of applied overhead in cost of goods sold 

$759,375   

Required: 

a. Compute the company's predetermined overhead rate for the year and the amount of underapplied or overapplied overhead for the year. 

b. Determine the difference between net operating income for the year if the underapplied or overapplied overhead is allocated to the appropriate accounts rather than closed directly to Cost of Goods Sold.