Durham 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 cost incurred, $14,600

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

d. Costs for salaries and wagers were incurred:

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 under applied or over applied overhead for the year

2. Prepare an income statement for the year (hint: no calculation are required to determine the cost of goods sold before any adjustment for under applied or over applied overhead.)