Question

1. 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 $__________

   4. Calculate adjusted Cost of Goods Sold after adjusting for the overhead variance.
   $___________

Answer 1

Answer
1
Estimated Overhead	$      180,000
Divide by Estimated direct labor hours	90000
Predetermined overhead rate	2	per direct labor hour
2
Overhead applied in January	$        16,300	8150*2
3
Overhead applied for the year	$      179,200	89600*2
Underapplied overhead	$          6,800	186000-179200
4
Adjusted cost of goods sold	$      222,800	216000+6800