Treatment of over- or underapplied overhead On January 1, 2006, Longstreet Company estimated that its total overhead costs for the coming year would be $139,400 and that it would make 34,000 units of product. Longstreet actually produced 34,600 units of product and incurred actual overhead costs of $140,500 during 2006.

Required

a. Calculate Longstreet’s predetermined overhead rate based on expected costs and production.

b. Determine whether overhead was overapplied or underapplied during 2006.

c. Explain how the entry to close the Manufacturing Overhead account will affect the Cost of Goods Sold account.