Chapter 19, Problem 16E

To determine

Concept Introduction:

Predetermined overhead rate- Predetermined overhead rate is the rate on which company allocates the indirect costs to manufacturing overhead account.

Predetermined overhead allocation rate is calculated as follows-

  $=Totalestimatedoverheadcost/Totalestimatedquantityoftheoverheadallocationbase$

To determine Predetermined overhead rate

To determine

Concept Introduction:

T-Account

T-Account is most common type of account. It is the simplest account which makes study of accounting very simple.

This accounts resembles with the English letter 'T'.

T-account has three parts-

• The title
• The debit which is on the left side
• The credit which is on the right side
T-Accounts are useful tools for accountants as it helps them to analyze company accounts in effective way.

To set up T-account and determine the applied overhead cost.

To determine

Concept Introduction:

Under or Over applied overhead-

Under or Over applied overhead- It is the difference between the actual and applied overhead.

If the actual overhead incurred is more than the overhead applied during a particular period, then it is a case of under-applied of overhead cost.

If the actual overhead incurred is less than the overhead applied during a particular period, then it is a case of over-applied of overhead cost.

To determine the overapplied or underapplied overhead.

To determine

Concept Introduction:

Adjusting entries-

Adjusting entries are prepared to complete the financial statement of the company and to reflect the accrual method of accounting. Adjusting entries are prepared before issuance of financial statement.

To prepare:

To prepare adjusting entry to allocate underapplied overhead costs.