Problem:
The predetermined overhead allocation rate for Constant, Inc., is based on estimated direct labor costs of $500,000 and estimated factory overhead of $550,000. Actual costs incurred were:
|
Direct Materials..................
|
$ 250,000
|
|
Direct Labor.......................
|
450,000
|
|
Indirect Materials...............
|
74,000
|
|
Indirect Labor.....................
|
118,000
|
|
Sales Commissions............
|
50,000
|
|
Factory Depreciation..........
|
180,000
|
|
Property Taxes, Factory.....
|
20,000
|
|
Factory Utilities..................
|
30,000
|
|
Advertising.........................
|
62,500
|
|
Factory Equipment Rental.....
|
99,000
|
Required:
Question 1: Calculate the predetermined overhead rate and calculate the overhead applied during the year.
Question 2: Determine the amount of over- or underapplied overhead AND prepare the journal entry to eliminate the over- or under-applied overhead.
Note: Please provide through step by step calculations.