(Under/Overapplied OH; OH disposition) Keller Co. budgeted the following variable and fixed overhead costs for 2007:

The company has decided to allocate overhead to production using machine hours. For 2007, machine hours have been budgeted at 100,000.

a. Determine the variable and fixed overhead application rates for Keller Company. The company uses separate variable and fixed manufacturing overhead control accounts.

b. During 2007, Keller Co. used 103,000 machine hours during production and incurred a total of $273,600 of variable overhead costs and $185,680 of fixed overhead costs. Prepare journal entries to record the incurrence of the actual overhead costs and the application of overhead to production.

c. What amounts of underapplied or overappliecl overhead exist at year- end 2007 for Keller?

d. Keller management believes that the fixed overhead amount calculated in part

(c) should be considered immaterial. Prepare the entry to close the Fixed Overhead Control account at the end of the year.

e. Keller management believes that the variable overhead amount calcu¬ lated in part

(c) should be considered material and should be prorated to the appropriate accounts. At year-end, Keller had the following bal¬ ances in its inventory and Cost of Goods Sold accounts:

Prepare the entry to close the Variable Overhead Control account at the end of the year.LO1.

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Variable indirect labor $100,000 Variable indirect materials 20,000 Variable utilities 80,000 Variable portion of other mixed costs 120,000 Fixed machinery depreciation 62,000 Fixed machinery lease payments 13,000 Fixed machinery insurance 16,000 Fixed salaries Fixed utilities 75,000 12,000