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Calculating the Predetermined Overhead Rate, Applying Overhead to Production, Reconciling Overhead at the End of the...

  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.
    $___________

Homework Answers

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
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