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# Predetermined overhead variance, applied, unit cost

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7. Blue Company applies overhead based on direct labor hours. At the beginning of the year, Blue estimates overhead to be \$480,000, Machine hours to be 120,000, and Direct Labor to be 80,000. During January, Blue has 6700 direct labor hours and 11000 machine hours.

a. What is the predetermined overhead rate?
1. \$6 per direct labor hour
2. \$40,200
3. \$4 per machine hour
4. \$44,000
5. none of the above

b. What is the amount of overhead applied for January?

c. If the actual overhead for January is \$41,000, what is the overhead variance and is it overapplied or underapplied?

8. Brown has applied overhead of \$73000 and actual overhead of 87600 for the month of November. It applies overhead based on direct labor hours and those equaled 14600 in November. Overhead for the year was estimated to be \$900,000. How many direct labor hours were estimated for the year.

a. 175200
b. 180,000
c. \$5
d. 150,000
e. \$6

9. At the beginning of the year, Mona Inc estimated that overhead would be \$540,000 and direct labor hours would be 180,000. At the end of the year, actual overhead was \$616,000 and there were actually 205,200 direct labor hours.

a. What is the overhead variance?

b. What is the predetermined overhead rate?

10. Sanders Manufacturing has the following amounts listed before reconciling the overhead variance.

Cost of goods sold \$935,000

a. \$951,000
b. \$919,000
c. \$939,000
d. \$955,000
e. \$915,000

11. On February 1, Job 12 had a beginning balance of \$200. During February, direct materials of \$500 and direct labor of \$200 were added to the job. Overhead is applied to production at a rate of 55% of direct labor. There are 5 units in Job 12.

What is the unit cost?
a. \$22
b. \$20
c. \$28
d. \$50.54
e. none of these

12. Kratzer Company designs and builds fire trucks. During May it had applied overhead of \$105,000. Overhead is applied at the rate of 70% of direct labor cost. Direct labor wages average \$10 per hour.

How many direct labor hours did Kratzer Company have for the month of May?
a. 15,000
b. 10,500
c. 1,500,000
d. 4,500
e. none of these

#### Solution Preview

7. Blue Company applies overhead based on direct labor hours. At the beginning of the year, Blue estimates overhead to be \$480,000, Machine hours to be 120,000, and Direct Labor to be 80,000. During January, Blue has 6700 direct labor hours and 11000 machine hours.

a. What is the predetermined overhead rate?
predetermined overhead rate = 480000/80000=\$6.00 per direct labor hour
Answer: 1. \$6 per direct labor hour

b. What is the amount of overhead applied for January?
=\$6*6700=\$40,200

c. If the actual overhead for January is \$41,000, what is the overhead variance and is it overapplied or underapplied?