Gordon Company is highly automated and uses computerized controllers in manufacturing operations. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of the time recorded to complete each job by the computerized controllers attached to each machine. The following estimates were used in preparing the predetermined overhead rate at the beginning of the year:

Machine time in hours ....................................       4,000

Manufacturing overhead cost ....................... $2,30,000

A severe economic recession resulted in cutting back production and a buildup of inventory in the company's warehouse. The company's cost records revealed the following actual cost and operating data for the year:

Required

1. Compute the company's predetermined overhead rate for the year.

2. Compute the under applied or over applied overhead for the year.

3. Prepare the journal entry to show the disposal of under/over applied overhead.

4. Discuss the impact of an economic recession on the application of manufacturing overhead.

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Machine time in hours. . Manufacturing overhead cost . Inventories at year-end: Raw Materials..... 3,150 $228,000 $ 20,000 $ 32,000 Work in Process Finished Goods. Cost of Goods Sold.... $530,000 $428,000 ... ..