Question

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 $180,000 Direct labor hours 90,000 Han uses normal costing and applies overhead on the basis of direct labor hours. For the month of January, direct labor hours were 8,150. By the end of the year, Han showed the following actual amounts: Overhead $186,000 Direct labor hours 89,600 Assume that unadjusted Cost of Goods Sold for Han was $216,000. 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? overhead $

Answer 1

Answer

• All working forms part of the answer
• Requirements

A	Overhead	$180,000
B	DLHs	90000
C = A/B	Predetermined Overhead rate	$2	per DLHs = Answer #1
D	Actual no of DLHs in Jan	8150
E = C x D	Overhead applied in January	$16,300	Answer #2
F	Actual no of DLHs in year	89600
G = C x F	Total Overhead applied	$179,200	Answer #3
	Was Overhead over or under applied	Under applied, because applied overhead = $ 179200, while actual overhead = $ 186000
	Under Applied Overhead by ($186000 - 179200)	$6,800	Answer #3
H	Unadjusted Cost of Goods Sold	$216,000
I = H + G	Adjusted Cost of Goods Sold	$222,800	Answer #4 [$216000 + 6800]