Hudson Company uses a job-order costing system. The following transactions took place last year:

a. Raw materials were requisitioned for use in production, $40,000 (80% direct and 20% indirect).

b. Factory utility costs incurred, $14,600.

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

d. Costs for salaries and wages were incurred as follows:

Direct labor.......................................$40,000

Indirect labor....................................$18,000

Sales Commissions..............................$10,000

Administrative salaries........................$ 25,000

f. Insurance costs, $3,000 (80% relates to factory operations, and 20% relates to selling and administrative activities).

g. Miscellaneous selling and administrative expenses incurred, $18,000.

h. Manufacturing overhead was applied to production. The company applies overhead on the basis of 150% of direct labor cost.

i. Goods that cost $130,000 to manufacture according to their job cost sheets were transferred to the finished goods warehouse.

j. Goods that had cost $120,000 to manufacture according to their job cost sheets were sold for $200,000.

QUESTION 1 - Determine the under-applied or over-applied overhead for the year. Show your work.

QUESTION 2 - Prepare an income statement for the year. (Note: No calculations are required to determine the cost of goods sold before any adjustment for under-applied or over-applied overhead.)