Question

04.39

Calculating the Predetermined Overhead Rate, Applying Overhead to Production. Reconciling Overhead at the End of the Year, Adjusting Cost of Goods Sold for Underand Overapplied Overhead At the beginning of the year, Han Company estimated the following: Overhead $240,000 Direct labor hours 80,000 Han uses normal costing and applies overhead on the basis of direct labor hours. For the month of January, direct labor hours were 8,250. By the end of the year, Han showed the following actual amounts: Overhead $246,000 Direct labor hours 79,600 Assume that unadjusted Cost of Goods Sold for Han was $336,000 Required: 1. Calculate the predetermined overhead rate for Han, Round your answers to the nearest centif rounding is required per direct labor hour 2. Calculate the overhead applied to production in January. (Note: Round to the nearest dollar, if rounding is required.) 3. Calculate the total applied overhead for the year, Was overhead over- or underapplied? By how much?

Answer 1

1) Overhead rate = 240000/80000 = 3 per labor hour

Applied overhead for January = 8250*3 = 24750

Applied overhead = 79600*3 = 238800

Overhead is under applied by (246000-238800) = 7200

2) Overhead rate = 900100/90000 = 10 per labor hour

Overhead applied = 21600*10 = $216000