Exercise $15-26$ Computing applied overhead and closing over$-$ or underapplied overhead P$4$

At the beginning of the year, Custom Mfg$.$ set its predetermined overhead rate using the following estimates: overhead costs, $$750,000,$ and direct materials costs, $$625,000.$ At year$-$end, the company reports that actual overhead costs for the year are $$758,000$ and actual direct materials costs for the year are $$625,000.$

Determine the predetermined overhead rate using estimated direct materials costs.

Set up a T$-$account for Factory Overhe during the year using the predetermined overhead rate. Determine whether overhead is over$-$ or underapplied $($and the amount$)$ for the year.

Prepare the entry to close any over$-$ or underapplied overhead to Cost of Goods Sold.