In December 2016, Custom Mfg. established its predetermined overhead rate for jobs produced during 2017 by using the following cost predictions: overhead costs, $750,000, and direct materials costs, $625,000. At year-end 2017, the company's records show that actual overhead costs for the year are $830,000. Actual direct materials cost had been assigned to jobs as follows.

Jobs completed and sold . . . . . . . . . . . . . . . . . . . . . $513,750

Jobs in finished goods inventory . . . . . . . . . . . . . . . . 102,750

Jobs in work in process inventory . . . . . . . . . . . . . . . . 68,500

Total actual direct materials cost . . . . . . . . . . . . . . . $685,000

1. Determine the predetermined overhead rate, using predicted direct materials costs, for 2017.

2. Set up a T-account for Factory Overhead and enter the overhead costs incurred and the amounts applied to jobs 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.