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Predetermined Overhead Rate, Overhead Variances, Journal Entries Craig Company uses a predetermined overhead rate to assign o

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Craig Company
Answer 1 Amount $ Note
Expected overhead     5,025,000.00 A
Estimated Machine hours        375,000.00 B
Predetermined overhead rate                  13.40 C=A/B
Answer 2
Actual machine hours        381,000.00 D
Predetermined overhead rate                  13.40 See C
Factory overhead amount applied    5,105,400.00 E=C*D
Factory overhead amount applied     5,105,400.00 See E
Actual factory overhead     5,018,400.00 F
Over applied          87,000.00 G=E-F
Answer 3
If overhead variance is immaterial then it should be disposed off to cost of good sold.
Journal Entry
Account Debit $ Credit $
Factory overhead          87,000.00
Cost of Goods Sold     87,000.00
Answer 4
If overhead variance is material then it should be disposed off in the ratio of work in process, finished goods and cost of good sold.
Work in process Finished goods Cost of good sold Total
Amount        590,625.00 606,250.00 1,928,125.00 3,125,000.00
% of allocation 18.90% 19.40% 61.70% 100.00%
Over applied overhead          16,443.00     16,878.00        53,679.00         87,000.00
Journal Entry
Account Debit $ Credit $
Factory overhead          87,000.00
Work in process     16,443.00
Finished goods     16,878.00
Cost of good sold     53,679.00
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