Applied vs. Actual Manufacturing Overhead Davis Manufacturing Corporation applies manufac- turing overhead on the basis of 150% of direct labor cost. An analysis of the related accounts and job order cost sheet indicates that during the year total manufacturing overhead incurred was $315,000 and that at year-end Work in Process Inventory, Finished Goods Inventory, and Cost of Goods Sold included $40,000, $20,000, and $140,000, respectively, of direct labor incurred during the current year.

a. Determine the underapplied manufacturing overhead at year-end (assume it is significant).

b. Prepare a journal entry to record the disposition of the underapplied manufacturing overhead