Cimino Company uses a predetermined overhead rate to assign overhead to jobs. Because Cimino's production is machine-dominated, overhead is applied on the basis of machine hours. The expected overhead for the year was $3.6 million, and the practical level of ac¬

tivity is 200,000 machine hours.

During the year, Cimino used 205,000 machine hours and incurred actual overhead costs of $3.29 million. Cimino also had the following balances of applied overhead in its accounts:

Required:
1. Compute a predetermined overhead rate for Cimino.
2. Compute the overhead variance, and label it as under- or overapplied.
3. Assuming the overhead variance is immaterial, prepare the journal entry to dispose of the variance at the end of the year.
4. Assuming the overhead variance is material, prepare journal entries that appropriately dispose of the overhead variance at the end of the year.

Transcribed Image Text:

Work in Process Finished Goods Cost of Goods Sold $ 576,000 624,000 1,800,000