Predetermined Overhead Rate, Overhead Variances, Journal Entries Craig Company u

Question

Predetermined Overhead Rate, Overhead Variances, Journal Entries Craig Company uses a predetermined overhead rate to assign overhead to jobs. Because Craig's production is machine intensive, overhead is applied on the basis of machine hours. The expected overhead for the year was $6,364,000, and the practical level of activity is 370,000 machine hours During the year, Craig used 376,000 machine hours and incurred actual overhead costs of $6,391,200. Craig also had the following balances of applied overhead in its accounts: Work-in-process inventory Finished goods inventory Cost of goods sold Required $ 543,375 560,625 1,771,000 1. Compute a predetermined overhead rate for Craig. Round your answer to the nearest cent. 17.2 per machine hour 2. Compute the overhead variance, and label it as under- or overapplied 6,467,20X overapplied

Explanation / Answer

1 Predetermined overhead rate $6364000/370000 17.2 2 Overhead Variance = (376000*17.20) - $6391200 $76,000 overapplied 3 Overhead Control $76,000 To Cost of Goods Sold $76,000 (Being overhead variance dispose at end of the year) 4 Overhead Control $76,000 To Work in process Inventory $14,364 To Finished Goods Inventory $14,820 To Cost of Goods Sold $46,816 The allocation between Work in process inventory, finished goods and COGS would be based on the overhead applied in these accounts Bal Work in Process 543375 (76000*543375)/2875000 14364 Finished Goods 560625 (76000*560625)/2875000 14820 Cost of Goods Sold 1771000 (76000*1771000)/2875000 46816 2875000

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