The predetermined overhead rate for Foster, 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.
Definitions:
Working Capital
The difference between a company's current assets and current liabilities, indicating the short-term liquidity and operational efficiency.
Carrying Costs
Expenses associated with holding or storing inventories, including warehousing, insurance, and spoilage costs.
Cash Inflows
The total amount of money being transferred into a business, often from operations, investments, or financing.
Net Working Capital
The difference between a company’s current assets and current liabilities, indicating its short-term financial health and ability to cover short-term liabilities.
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