Chapter 2, Problem 15E

In December 2014, Infodeo established its predetermined overhead rate for produced during 2015 by using the following cost predictions: overhead costs, $1,680,000, and direct labor costs, $480,000. At year-end 2015, the company’s records show that actual overhead costs for the year are $1,652,000. Actual direct labor cost had been assigned to jobs as follows.

1. Determine the predetermined overhead rate for 2015.
2. Set up a T-account for overhead and enter the overhead costs incurred and the amounts applied to movies during the year using the predetermined overhead rate.
3. Determine whether overhead is overapplied or underapplied (and the amount) during the year.
4. Prepare the adjusting entry to allocate any over-or underapplied overhead to Cost of Goods Sold.