The Predetermined Overhead Allocation Rate for Forsythe, Inc

Essay

The predetermined overhead allocation rate for Forsythe, Inc., is based on estimated direct labor costs of $400,000 and estimated factory overhead of $500,000. Actual costs incurred were:
(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.