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Babb Company is a manufacturing firm that uses job-order costing. The company's inventory balances were as follows at the beginning and end of the year:
The company applies overhead to jobs using a predetermined overhead rate based on machine-hours. At the beginning of the year, the company estimated that it would work 17,000 machine-hours and incur $272,000 in manufacturing overhead cost. The following transactions were recorded for the year:
Required:
a) Prepare a schedule of cost of goods manufactured in good form.
b) Was the overhead underapplied or overapplied? By how much?
c) Prepare an income statement for the year in good form. The company closes any underapplied or overapplied manufacturing overhead to Cost of Goods Sold.
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