Overhead Variance (Over- or Underapplied), Closing to Cost of Goods Sold At the

Question

Overhead Variance (Over- or Underapplied), Closing to Cost of Goods Sold

At the end of the year, Ilberg Company provided the following actual information:

Ilberg uses normal costing and applies overhead at the rate of 80% of direct labor cost. At the end of the year, Cost of Goods Sold (before adjusting for any overhead variance) was $1,890,000.

Dispose of the overhead variance by adjusting Cost of Goods Sold. Adjusted COGS $____

Calculate the overhead variance for the year. $____

Explanation / Answer

Ilberg Details Amt $ Actual Overhead incurred                    423,600.00 Actual Direct Labor cost                    532,000.00 Overhead applied @80% of Direct Labor cost=                    425,600.00 Overapplied Overhead=                        2,000.00 Cost of Goods before overhead variance adjustment                1,890,000.00 Less: Overapplied Overhead                      (2,000.00) Adjusted COGS                1,888,000.00 Overhead variance =                        2,000.00 F

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