Problem

Moody Corporation uses a job-order costing system with a plantwide overhead rate based on machine-hours. At the beginning of the year, the company made the following estimates:

Machine-hours required to support estimated production 159,000
Fixed manufacturing overhead cost $ 652,000
Variable manufacturing overhead cost per machine-hour $ 4.40

Required:

1. Compute the predetermined overhead rate.

2. During the year, Job 400 was started and completed. The following information was available with respect to this job:

Direct materials requisitioned $ 390
Direct labor cost $ 260
Machine-hours used 31

Compute the total manufacturing cost assigned to Job 400

3-a. During the year the company worked a total of 145,700 machine-hours on all jobs and incurred actual manufacturing overhead costs of $1,239,950. What is the amount of underapplied or overapplied overhead for the year?

3-b. If this amount were closed out entirely to Cost of Goods Sold, would net operating income increase or decrease?