Question

At the beginning of the year, Han Company estimated the following: Overhead $582,400 Direct labor hours 80,000 Han uses normal costing and applies overhead on the basis of direct labor hours. For the month of January, direct labor hours were 6,950. By the end of the year, Han showed the following actual amounts: Overhead $613,320 Direct labor hours 84,100 Assume that unadjusted Cost of Goods Sold for Han was $927,000. Required: 1. Calculate the predetermined overhead rate for Han. Round your answer to the nearest cent. $ per direct labor hour 2. Calculate the overhead applied to production in January. (Note: Round to the nearest dollar.) $ 3. Calculate the total applied overhead for the year. $ Was overhead over- or underapplied

Answer 1

Answer:

1. Calculate the predetermined overhead rate for Han. Round your answer to the nearest cent.

• $7.28 per direct labor hour

2. Calculate the overhead applied to production in January. (Note: Round to the nearest dollar.)

• $50,596

3. Calculate the total applied overhead for the year. $ Was overhead over- or underapplied

• applied overhead during the year = $612,248
• overhead was underapplied by $1,072 since actual costs were higher than budgeted costs

Explanation:

estimates:

Overhead $582,400

Direct labor hours 80,000

overhead rate per hour = $582,400 / 80,000 = $7.28

direct labor hours during January = 6,950

applied overhead = 6,950 x $7.28 = $50,596

actual overhead during the year:

Overhead $613,320

Direct labor hours 84,100

applied overhead during the year = 84,100 x $7.28  = $612,248

over or under applied overhead = actual overhead - applied overhead = $613,320 - $612,248 = $1,072 unfavorable

Answer 2

1. The predetermined overhead rate for Han is $7.28.

2. The overhead applied to production in January is $50,596.

3. Total Applied overhead during the year is $612,248.

Predetermined overhead:

1. Predetermined overhead rate:

Predetermined overhead rate=Overhead/Direct labor hours

Predetermined overhead rate = $582,400 / 80,000

Predetermined overhead rate=$7.28

2. Applied overhead during the year:

Overhead applied to production = 6,950 x $7.28

Overhead applied to production =$50,596

3. Total Applied overhead during the year:

Applied overhead= 84,100 x $7.28  

Applied overhead = $612,248

4. Over or under applied overhead:

Over or under applied overhead= $613,320 - $612,248

Over or under applied overhead= $1,072 Underapplied

Inconclusion the predetermined overhead rate for Han is $7.28, the overhead applied to production in January is $50,596, total Applied overhead during the year is $612,248.

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