Easy Decorating uses a job-order costing system to collect the costs of its interior decorating business. Each client's consultation is treated as a separate job. Overhead is applied to each job based on the number of decorator hours incurred. Listed below are data for the current year:

Estimated overhead ....................................$840,000

Actual overhead ........................................$861,000

Estimated decorator hours ...............................40,000

Actual decorator hours ....................................41,500

The company uses Operating Overhead in place of Manufacturing Overhead.

Instructions

(a) Calculate the predetermined overhead rate.

(b) Prepare the entry to apply the overhead for the year.

(c) Determine whether the overhead was under- or over-applied and by how much.