Accounting-Calculating the Predetermined Overhead Rate

| January 30, 2017

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, Horvath Company estimated the following:

Overhead $180,000
Direct labor hours 90,000
Horvath 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, Horvath showed the following actual amounts:

Overhead $186,000
Direct labor hours 89,600
Assume that unadjusted Cost of Goods Sold for Horvath was $216,000.


1. Calculate the predetermined overhead rate for Horvath. Round your answers to the nearest cent, if rounding is required.
$ 2 per direct labor hour (I KNOW THIS ONE IS RIGHT)

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?
UNDERAPPLIED — overhead $ ______________________________

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

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