Durham Company uses a job-costing system. The following transaction took place last year: Raw materials requisitioned for use in production, $40,000…

Durham Company uses a job-costing system. The following transaction took place last year:a. Raw materials requisitioned for use in production, $40,000 (80% direct and 20% indirect).b. Factory utilities cost incurred, $14,600.c. Depreciation recorded on plant equipment, $28,000. Three -fourths of the depreciation relates to factory equipment, and the remainder relates to selling and administrative equipment.Costs for salaries and wages were incurred as follows:Direct Labor…………………. $40,000Indirect Labor………………. $18,000Sales Commissions………. $10,000Administrative Salaries… $25,000e. Insurance costs incurred, $3,000 (80% relates to factory operations, and 20% relates to selling and administrative activities).f. Miscellaneous selling and administrative expenses incurred, $18,000.g. Manufacturing overhead was applied to production. The company applies overhead on the basis of 150% of direct labor costs.h. Goods that cost $130,000 to manufacture according to their job cost sheets were transferred to the finished goods warehouse.i. Goods that had cost $120,000 to manufacture according to their job cost sheets were sold for $200,000.Required:1. Determine the under applied or over applied overhead for the year.2. Prepare an income statement for the year. (Hint: No calculations are required to determine cost of goods sold before any adjustment for under applied or over applied overhead.)

Solution 1Overhead CostIndirect Raw MaterialIndirect LaborFactory UtilitiesDepreciationInsurance Cost $ 8,000.00$ 18,000.00$ 14,600.00$ 21,000.00$ 2,400.00 Total actual overheads cost $…