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    Fundamental Accounting Principles: Job Order Cost Accounting

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    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
    Advertising $62500
    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.

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    Solution Summary

    Provides steps necessary to calculate the overhead rate.