Predetermined Overhead Rate, Overhead Variances, Journal Entries

Craig Company uses a predetermined overhead rate to assign overhead to jobs. Because Craig's production is machine intensive, overhead is applied on the basis of machine hours. The expected overhead for the year was $5,653,600, and the practical level of activity is 382,000 machine hours.

During the year, Craig used 389,500 machine hours and incurred actual overhead costs of $5,675,600. Craig also had the following balances of applied overhead in its accounts:

Work-in-process inventory	$	566,385
Finished goods inventory		625,190
Cost of goods sold		1,903,425

Required:

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1. Compute a predetermined overhead rate for Craig. Round your answer to the nearest cent.

$fill in the blank cb21dafdb00dfa5_1 per machine hour

2. Compute the overhead variance, and label it as under- or overapplied. $fill in the blank cb21dafdb00dfa5_2

overappliedunderappliedoverapplied

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3. Assuming the overhead variance is immaterial, prepare the journal entry to dispose of the variance at the end of the year.

blank	CashCost of goods soldFinished goods inventoryOverhead controlWork-in-process inventoryOverhead control	Overhead control
	CashCost of goods soldFinished goods inventoryOverhead controlWork-in-process inventoryCost of goods sold		Cost of goods sold

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4. Assuming the overhead variance is material, prepare the journal entry that appropriately disposes of the overhead variance at the end of the year. If an amount box does not require an entry, leave it blank.

blank	CashCost of goods soldFinished goods inventoryOverhead controlWork-in-process inventoryOverhead control	Overhead control	Overhead control
	Account payableCashOverhead controlRaw materialsWork-in-process inventoryWork-in-process inventory	Work-in-process inventory	Work-in-process inventory
	CashDirect laborFinished goods inventoryOverhead controlRaw materialsFinished goods inventory	Finished goods inventory	Finished goods inventory
	Beginning inventoryCashCost of goods soldDirect materialsOverhead controlCost of goods sold	Cost of goods sold	Cost of goods sold