Question

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

   At the beginning of the year, JJB Inc. estimated that overhead would be $880,000 and direct labor hours would be 220,000 hours. At the end of the year actual overhead was $920,600 and there were actual 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 1

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