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Calculating the Predetermined Overhead Rate, Applying Overhead to Production, Reconciling Overhead at the End of the Year, Adjusting Cost of Goods Sold for Under- and Overapplied Overhead
At the beginning of the year, Han Company estimated the following:
Overhead | $210,000 |
Direct labor hours | 70,000 |
Han uses normal costing and applies overhead on the basis of direct labor hours. For the month of January, direct labor hours were 8,350. By the end of the year, Han showed the following actual amounts:
Overhead | $216,000 |
Direct labor hours | 69,600 |
Assume that unadjusted Cost of Goods Sold for Han was $276,000.
Required:
1. Calculate the predetermined overhead rate
for Han. Round your answers to the nearest cent, if 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?
Underapplied overhead $
4. Calculate adjusted Cost of Goods Sold after
adjusting for the overhead variance.
$
1) predetermined overhead rate | ||||
= total estimated overhead/ total budgeted direct labor hours | ||||
=$210000/70000 | ||||
=$3 per labor hour | ||||
2) | overhead applied to production in January | |||
=$3 per hour *8350 hours | ||||
=$25050 | ||||
3) | total applied overhead for the year | |||
=$3 per hour*69600 hours | ||||
$ 2,08,800 | ||||
Under Applied = $216000-208800 | ||||
=$7200 | ||||
4) | Adjusted cost of goods sold | |||
=$276000+$7200 | ||||
$ 2,83,200 | ||||
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