Calculate the predetermined overhead rate for Olivar
Exercise 16-32 CALCULATING THE PREDETERMINED OVERHEAD RATE, APPLYING OVERHEAD TO PRODUCTION, RECONCILING OVERHEADÂ AT THE END OF THE YEAR, ADJUSTING COST OF GOODSÂ Â Â SOLD
FOR UNDER- AND OVERAPPLIED OVERHEAD
At the beginning of the year, Olivar Company estimated the following:
Overhead                     $216,000
Direct labor hours            80,000
Olivar uses normal costing and applies overhead on the basis of direct labor hours. For the month of January, direct labor hours were 7,950. By the end of the year, Oli- var showed the following actual amounts:
Overhead                     $226,000
Direct labor hours            82,600
Assume that unadjusted Cost of Goods Sold for Olivar was $235,670.
Required:
1.       Calculate the predetermined overhead rate for Olivar.
2.       Calculate the overhead applied to production in January.
3.       Calculate the total applied overhead for the year. Was overhead over- or underap- plied? By how much?
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4.       Calculate adjusted Cost of Goods Sold after adjusting for the overhead variance.
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