Question

Callen Corp uses a normal job order costing system with manufacturing overhead applied to products on the basis of machine hours. For the upcoming year, Callen Corp estimated total manufacturing overhead cost at $270,000 and total machine hours of 45,000. During the year, actual manufacturing overhead incurred was $258,750 and 46,600 machine hours were used.

a. Calculate the predetermined overhead rate.
b. Calculate how much manufacturing overhead will be applied to production.
c. Is overhead over- or underapplied? By how much?
d. What account should be adjusted for over- or underapplied overhead? Should the balance be increased or decreased?

.

The difference between the actual quantity and the standard quantity, multiplied by the standard price is the

direct materials volume variance.

direct materials spending variance.

direct materials price variance.

direct materials quantity variance.

Answer 1

a)	predetermined overhead rate
	total manufacturing overhead cost/total machine hours
	270,000/45,000
	6
	$6 per machine hours
b)	overhead applied
	actual machine hours * overhead rate
	46,600*6
	279600
c)	overhead applied				279,600
	Actual overhead				258,750
	overhead over applied				20,850
d)	cost of goods sold be adjusted
	the account should be decreased
2)	Direct materials quantity variance