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 - Setermine the underapplied or overapplied 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 underapplied or overapplied overhead.)