Predetermined Overhead Rate; Applying Overhead; Underapplied or Overapplied Overhead [LO 4-2, LO 4-4, LO 4-5] Ravsten Company uses a job-order costing system. The company applies overhead cost to jobs on the basis of machine-hours. For the current year, the company estimated that it would work 36,000 machine-hours and incur $153,000 in manufacturing overhead cost. The following transactions occurred during the year: a. Raw materials requisitioned for use in production, $190,000 (80% direct and 20% indirect). b. The following costs were incurred for employee services: Direct labor....... Indirect labor..................... Sales commissions................ Administrative salaries ............. $160,000 $18,000 $10,000 $25,000 c. Heat, power, and water costs incurred in the factory, $42,000. d. Insurance costs, $10,000 (90% relates to factory operations, and 10% relates to selling and administrative activities). e. Advertising costs incurred, $50,000. f. Depreciation recorded for the year, $60,000 (85% relates to factory operations, and 15% relates to selling and administrative activities). g. The company used 40,000 machine-hours during the year. h. Goods that cost $480,000 to manufacture according to their job cost sheets were transferred to the finished goods warehouse. i. Sales for the year totaled $700,000. The total cost to manufacture these goods according to their job cost sheets was $475,000. 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.)