3 Problem 3-12 (Static) Predetermined Overhead Rate; Disposing of Underapplied or Overapplied Overhead [LO3-4] Luzadis Company makes furniture using the latest automated technology. The company uses a job-order costing system and applies 10 manufacturing overhead cost to products based on machine-hours. The predetermined overhead rate was based on a cost formula points that estimates $900,000 of total manufacturing overhead for an estimated activity level of 75,000 machine-hours. During the year, a large quantity of furniture on the market caused Luzadis to cut production and build inventories. The company provided the following data for the year: eBook Machine-hours 60,000 Manufacturing overhead cost $ 850,000 Inventories at year-end: References Raw materials $ 30,000 Work in process (includes overhead applied of $36,090) $ 100,900 Finished goods (includes overhead applied of $180,600) $ 500, 000 Cost of goods sold (includes overhead applied of $504,000) $ 1, 400, 900 Required: 1. Compute the underapplied or overapplied overhead. 2. Assume the company closes underapplied or overapplied overhead to Cost of Goods Sold. Prepare the appropriate journal entry. 3. Assume the company allocates underapplied or overapplied overhead proportionally to Work in Process, Finished Goods, and Cost of Goods Sold. Prepare the appropriate journal entry. 4. How much higher or lower will net operating income be if the underapplied or overapplied overhead is allocated to Work in Process, Finished Goods, and Cost of Goods Sold rather than being closed to Cost of Goods Sold? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Assume the company closes underapplied or overapplied overhead to Cost of Goods Sold. Prepare the appropriate journal entry. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field