The Predetermined Overhead Rate for Foster, Inc (A) Calculate the Predetermined Overhead Rate and Calculate the Overhead

Essay

The predetermined overhead rate for Foster, Inc., is based on estimated direct labor costs of $400,000 and estimated factory overhead of $500,000. Actual costs incurred were:
$\begin{array}{|l|c|}\hline \text { Direct materials } & \$ 240,000 \\\hline \text { Direct labor} & 410,000 \\\hline \text { Indirect materials. } & 55,000 \\\hline \text { Indirect labor } & 125,000 \\\hline \text { Sales commissions } & 55,000 \\\hline \text { Factory depreciation } & 170,000 \\\hline \text { Property taxes, factory......... } & 15,000 \\\hline \text { Factory utilities. } & 35,000 \\\hline \text { Advertising......... } & 62,500 \\\hline\text { Factory equipment rental. }&110,000\\\hline\end{array}$
(a) Calculate the predetermined overhead rate and calculate the overhead applied during the year.
(b) Determine the amount of over- or underapplied overhead and prepare the journal entry to eliminate the over- or underapplied overhead assuming that it is not material in amount.