Overhead Variance (Over- or Underapplied), Closing to Cost ofGoods Sold
At the end of the year, Ilberg Company provided the followingactual information:
Overhead $423,600 Direct labor cost 532,000
Ilberg uses normal costing and applies overhead at the rate of80% of direct labor cost. At the end of the year, Cost of GoodsSold (before adjusting for any overhead variance) was$1,890,000.
Dispose of the overhead variance by adjusting Cost of GoodsSold. Adjusted COGS $____
Calculate the overhead variance for the year. $____
Overhead Variance (Over- or Underapplied), Closing to Cost ofGoods Sold
At the end of the year, Ilberg Company provided the followingactual information:
| Overhead | $423,600 |
| Direct labor cost | 532,000 |
Ilberg uses normal costing and applies overhead at the rate of80% of direct labor cost. At the end of the year, Cost of GoodsSold (before adjusting for any overhead variance) was$1,890,000.
Dispose of the overhead variance by adjusting Cost of GoodsSold. Adjusted COGS $____
Calculate the overhead variance for the year. $____
Related questions
Hubley Inc. uses a job-order costing system in which anyunderapplied or overapplied overhead is closed out to cost of goodssold at the end of the month. The company has provided thefollowing data for August:
| Directmaterials | $ | 79,000 |
| Direct labor cost | S | 97,500 |
| Manufacturing overhead costincurred | $ | 64,100 |
| Manufacturing overhead costapplied | $ | 68,250 |
| Inventories: | Beginning | Ending |
| Work in process | $15,000 | $17,100 |
| Finished goods | $58,150 | $34,500 |
The cost of goods sold that appears on the income statement forAugust and that has been adjusted for any underapplied oroverapplied overhead is closest to:
$262,150
$270,450
$242,650
$266,300
| In December 2014, Infodeo established its predetermined overhead rate for movies produced during year 2015 by using the following cost predictions: overhead costs, $1,628,000,and direct labor costs, $440,000. At year-end 2015, the companyâs records show that actual overhead costs for the year are $909,800. Actual direct labor cost had been assigned to jobs as follows. |
| Movies completed and released | $ | 200,000 |
| Movies still in production | 49,000 | |
| Total actual direct labor cost | $ | 249,000 |
| 1. | Determine the predetermined overhead rate for year 2015. | ||||||||||||||||||||||
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| 2&3. | Enter the overhead costs incurred and the amounts applied during the year using the predetermined overhead rate and determine whether overhead is overapplied or underapplied. | ||||||||||||||
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| 4. Prepare the adjusting entry to allocate any over- or underapplied overhead to Cost of Goods Sold | |||||||||||||||||||||||||||||||||||
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In December 2014, Learer Companyâs manager estimated next yearâs total direct labor cost assuming 25 persons working an average of 3,000 hours each at an average wage rate of $30 per hour. The manager also estimated the following manufacturing overhead costs for year 2015.
| Indirect labor | $ | 339,200 | |
| Factory supervision | 169,000 | ||
| Rent on factory building | 160,000 | ||
| Factory utilities | 108,000 | ||
| Factory insurance expired | 88,000 | ||
| DepreciationâFactory equipment | 486,000 | ||
| Repairs expenseâFactory equipment | 80,000 | ||
| Factory supplies used | 88,800 | ||
| Miscellaneous production costs | 56,000 | ||
| Total estimated overhead costs | $ | 1,575,000 | |
| At the end of 2015, records show the company incurred $1,863,000 of actual overhead costs. It completed and sold five jobs with the following direct labor costs: Job 201, $624,000; Job 202, $583,000; Job 203, $318,000; Job 204, $736,000; and Job 205, $334,000. In addition, Job 206 is in process at the end of 2015 and had been charged $37,000 for direct labor. No jobs were in process at the end of 2014. The companyâs predetermined overhead rate is based on direct labor cost. |
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| 1.a | Determine the predetermined overhead rate for year 2015.
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1.b
Determine the total overhead cost applied to each of the six jobs during year 2015.
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1.c
Determine the over- or underapplied overhead at year-end 2015.
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2.
Assuming that any over- or underapplied overhead is not material, prepare the adjusting entry to allocate any over- or underapplied overhead to Cost of Goods Sold at the end of year 2015.
Journal entry worksheet
Record the entry to allocate any overapplied or underapplied overhead to Cost of Goods Sold at the end of year 2015.
Note: Enter debits before credits.
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