In December 2012, Cardozo Company established its predetermined overhead rate for jobs produced during year 2013 by using the following cost predictions: overhead costs, $ 750,000, and direct labor costs, $ 625,000. At year end 2013, the company's records show that actual overhead costs for the year are $ 830,000. Actual direct labor cost had been assigned to jobs as follows.
Jobs completed and sold . . . . . . . . . . . . . . . . . $ 513,750
Jobs in finished goods inventory . . . . . . . . . . . 102,750
Jobs in goods in process inventory . . . . . . . . . 68,500
Total actual direct labor cost . . . . . . . . . . . . . $ 685,000
1. Determine the predetermined overhead rate for year 2013.
2. Set up a T-account for Factory Overhead and enter the overhead costs incurred and the amounts applied to jobs during the year using the predetermined overhead rate.
3. Determine whether overhead is over applied or under applied (and the amount) during the year.
4. Prepare the adjusting entry to allocate any over or under applied overhead to Cost of Goods Sold.