Question 3:

Cabinets4U makes and installs custom cabinets for home renovations. The company applies overhead on the basis of direct labour hours. The company estimates its annual overhead to be $125,000 and it expects employees to work 10,000 hours. During the year, employees actually worked 11,000 hours and the actual amount spent on overhead was $130,000.

Required:

1. Compute the predetermined overhead rate.
2. How much overhead would be applied to jobs during the year?
3. By how much was overhead overapplied or underapplied for the year?