Easy Decorating uses a job order costing system to collect the costs of its interior decorating business. Each client’s consultation is treated as a separate job. Overhead is applied to each job based on the number of decorator hours incurred. Listed below are data for the current year.
|
Budgeted overhead |
$960,000 |
|
Actual overhead |
$982,800 |
|
Budgeted decorator hours |
40,000 |
|
Actual decorator hours |
40,500 |
The company uses Operating Overhead in place of Manufacturing Overhead.
Instructions
(a) Compute the predetermined overhead rate.
(b) Prepare the entry to apply the overhead for the year.
(c) Determine whether the overhead was under or over applied and by how much.