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 $5,054,000, and the practical level of activity is 361,000 machine hours.

During the year, Craig used 368,000 machine hours and incurred actual overhead costs of $5,077,000. Craig also had the following balances of applied overhead in its accounts:

Work-in-process inventory $ 552,050
Finished goods inventory 579,500
Cost of goods sold 1,918,450
Required:

Question Content Area
1. Compute a predetermined overhead rate for Craig. Round your answer to the nearest cent.

$fill in the blank 94859f077ff1069_1
14
per machine hour

2. Compute the overhead variance, and label it as under- or overapplied.
$fill in the blank 94859f077ff1069_2
75,000

overapplied

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Feedback
1. Predetermined OH rate = Budgeted annual overhead ÷ Budgeted annual driver level

2. Calculate over- or underapplied by subtracting Applied OH from Actual OH

Question Content Area
3. Assuming the overhead variance is immaterial, prepare the journal entry to dispose of the variance at the end of the year.

blank
Overhead control

Cost of goods sold
Feedback Area
Feedback
3. If an overhead variance is immaterial, it is assigned to cost of goods sold.
Question Content Area
4. Assuming the overhead variance is material, prepare the journal entry that appropriately disposes of the overhead variance at the end of the year. If an amount box does not require an entry, leave it blank.

blank
Overhead control

Work-in-process inventory

Finished goods inventory

Cost of goods sold