Calculating the Predetermined Overhead Rate, Applying Overhead to Production, Reconciling Overhead at the End of the Year, Adjusting Cost of Goods Sold for Under- and Overapplied Overhead

At the beginning of the year, Potter Company estimated the following:

Overhead	$280,000
Direct labour hours	70,000

Potter uses normal costing and applies overhead on the basis of direct labour hours. For the month of January, direct labour hours were 8,450. By the end of the year, Potter showed the following actual amounts:

Overhead	$286,000
Direct labour hours	69,600

Assume that unadjusted Cost of Goods Sold for Potter was $416,000.

Required:

1. Calculate the predetermined overhead rate for Potter. Round your answers to the nearest cent, if rounding is required. $------- per direct labour hour

2. Calculate the overhead applied to production in January. (Note: Round to the nearest dollar, if rounding is required.) $-----------------

3. Calculate the total applied overhead for the year. $-----------

Was overhead over- or underapplied? By how much?

UnderappliedOverapplied

overhead $--------

4. Calculate adjusted Cost of Goods Sold after adjusting for the overhead variance.