Test Company produces a product that passes through two departments: Department 1 and Department 2. Test Company determines product cost using a normal cost system. The company applies overhead using a plant-wide rate based on machine hours. The company prepared the following estimates at the beginning of the year.

	Department 1	Department 2	Total
Prime cost	$375,000	$700,000	$1,075,000
Overhead cost	$420,000	$240,000	$660,000
Direct labor hours	16,000	50,000	66,000
Machine hours	100,000	20,000	120,000

During the year, Test Company reported the following actual results.

	Department 1	Department 2	Total
Prime cost	$475,000	$850,000	$1,325,000
Overhead cost	$450,000	$300,000	$750,000
Direct labor hours	20,000	60,000	80,000
Machine hours	125,000	25,000	150,000

Q1. Calculate the predetermined overhead rate Test Company uses to apply overhead.

a. $5 per machine hour

b. $16.2 per machine hour

c. $5.5 per machine hour

d. $10 per direct labor hour

Q2. Calculate the overhead applied to production for the year.

	a.	$825,000
	b.	$660,000
	c.	$800,000
	d.	$600,000

Q3. Calculate the overhead variance for the year.

	a.	$75,000 underapplied
	b.	$75,000 overapplied
	c.	$165,000 underapplied
	d.	$90,000 overapplied

Q4. Calculate the total normal product cost for the year.

	a.	$1,735,000
	b.	$2,075,000
	c.	$1,900,000
	d.	$2,150,000