Problem 3-12 (Algo) 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 manufacturing overhead cost to products based on machine-hours. The predetermined overhead rate was based on a cost formula that estimates $1,615,000 of total manufacturing overhead for an estimated activity level of 85,000 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: Machine-hours 77,000 Manufacturing overhead cost $ 1,574,000 Inventories at year-end: Raw materials $ 14,000 Work in process (includes overhead applied of $73,150) $ 94,000 Finished goods (includes overhead applied of $277,970) $ 357,200 Cost of goods sold (includes overhead applied of $1,111,880) $ 1,428,800