Almeda Products, Inc., uses a job-order costing system. During the year, the following transactions were completed:
a. Raw materials were issued from the storeroom for use in production, $180,000 (80% direct and 20% indirect).
b. Employee salaries and wages were accrued as follows: direct labor, $200,000; indirect labor, $82,000; and selling and administrative salaries, $90,000.
c. Utility costs were incurred in the factory, $65,000.
d. Advertising costs were incurred, $100,000.
e. Insurance costs, $20,000 (90% related to factory operations, and 10% related to selling and administrative activities).
f. Depreciation was recorded, $180,000 (85% related to factory assets, and 15% related to selling and administrative assets).
g. Manufacturing overhead was applied to jobs at the rate of 175% of direct labor cost.
h. Goods that cost $700,000 to manufacture according to their job cost sheets were transferred to the finished goods warehouse.
i. Sales for the year totaled $1,000,000. The total cost to manufacture these goods according to their job cost sheets was $720,000.
Required:
1. Determine the underapplied or overapplied overhead for the year.
2. Prepare an income statement for the year. (Hint: No calculations are required to determine the cost of goods sold before any adjustment for underapplied or overapplied overhead.)