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Use the information below to answer the next 3 questions: At the beginning of the year, JJB...

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Accounting

  1. Use the information below to answer the next 3questions:

    At the beginning of the year, JJB Inc. estimated that overheadwould be $880,000 and direct labor hours would be 220,000 hours. Atthe end of the year actual overhead was $920,600 and there wereactual direct labor hours of 230,000. Year ended unadjusted COGS is$2,000,000.

    What is the Rredetermined Overhead Rate?

    $2.63

    $4

    $4.18

    None of the above

QUESTION 8

  1. What is the overhead variance?

    $200 overapplied

    $400 underapplied

    $600 overapplied

    $600 underapplied  

QUESTION 9

  1. The adjusted Cost of Goods Sold is:

    $2,000,000

    $2,000,400

    $2,000,600

    $1,999,400

Answer & Explanation Solved by verified expert
4.1 Ratings (768 Votes)

Answer:
1)
Predetermined Overhead rate
                 = Estimated Overhead Costs / Estimated Direct Labor Hours
                 =   $ 880,000 / 220,000 hours
                 =    $ 4
Predetermined Overhead rate   =    $ 4
Option (b) is Correct
2)
Overhead Variance
               =   Actual Overhead (-) Applied Overhead
               =     $ 920,600 (-) [ 230,000 Hours x $ 4 ]
               =      $ 920,600 (-) $ 920,000
               =      $ 600 Underapplied
Overhead Variance =      $ 600 Underapplied
Option (d) is Correct
3)
Adjusted Cost of Goods Sold
                  = Unadjusted Cost of Goods Sold + Underapplied Overhead
                  =    $ 2,000,000 + $ 600
                  =    $ 2,000,600
Adjusted Cost of Goods Sold     =    $ 2,000,600
Option (c ) is Correct

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