The predetermined overhead allocation rate for Forsythe, Inc., is based on estimated direct labor costs of $400000 and estimated factory overhead of $500000. Actual costs incurred were:
Direct materials $250000
Direct labor $410000
Indirect materials $55000
Indirect labor $125000
Sales commissions $50000
Factory depreciation $170000
Property taxes, factory $15000
Factory utilities $35000
Factory equipment rental $100000
a. Calculate the predetermined overhead rate and calculate the overhead applied during the year.
b. Determined the amount of over- or underapplied overhead and prepare the journal entry to eliminate the over- or under-applied overhead assuming that it is not material in amount.
Provides steps necessary to calculate the overhead rate.