On January 1, 2018, Tinicum Company estimated that its total overhead costs for the coming year would be $646,000 and that it would make 34,000 units of product. Tinicum actually produced 34,600 units of product and incurred actual overhead costs of $638,000 during 2018.
Required
a. Calculate Tinicum's predetermined overhead rate based on expected costs and production.
b. Determine whether overhead was over applied or under applied during 2018.
c. Explain how the entry to close the Manufacturing Overhead account will affect the Cost of Goods Sold account.