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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:
Question a) Compute the predetermined overhead rate.
Question b) How much overhead would be applied to jobs during the year?
Question c) By how much was overhead overapplied or underapplied for the year?
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