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E2-13 Pure Decorating

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Pure Decorating uses a job order cost 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.

Estimated overhead   920,000
Actual overhead   942,800
Estimated decorator hours   40,000
Actual decorator hours   40,500

The company uses Operating Overhead in place of Manufacturing Overhead.
(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 overapplied and by how much.

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