PROBLEM 3-22 Predetermined Overhead Rate; Disposition of Underapplied or Overapplied Over- head [L03-1, LO3-7 Luzadis Company makes furniture using the latest automated technology. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of machine-hours. The following estimates were used in preparing the predetermined overhead rate at the beginning of the year: Machine-hours Fixed manufacturing overhead cost . .. .. . . . Variable manufacturing overhead per computer-hour 75,000 $795,000 $1.40 During the year, a glut of furniture on the market resulted in cutting back production and a buildup of furniture in the company's warehouse. The company's cost records revealed the follow ing actual cost and operating data for the year Machine-hours... Manufacturing overhead cost Inventories at year-end: 60,000 $850,000 Work in process (includes overhead applied of 36,000) .. Finished goods (includes overhead applied of 180,000). . $30,000 $100,000 $500,000 Cost of goods sold (includes overhead applied of 504,000)