Pristine Painting Services uses a job order cost system to collect the costs of its home painting business. Each customers house is treated as a separate job. Overhead is applied to each job based on the number of painting hours required for each house. Listed below are the data for the current year:

Estimated overhead $780,000

Actual overhead $772,450

Estimated painting hours 39,000

Actual painting hours 38,750

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 overapplied and by how much.

(d) If estimated overhead increases to $799,500, discuss how this would impact (1) applied overhead and (2) actual overhead. Support your discussion with calculations. Determine whether overhead would be under- or overapplied and by how much.