mcdougal company uses a predetermined overhead rate to assign ov 272392

McDougal Company uses a predetermined overhead rate to assign overhead to jobs. Because McDougal’s production is machine intensive, overhead is applied on the basis of machine hours. The expected overhead for the year was $2.8 million, and the practical level of activity is 250,000 machine hours. During the year, McDougal used 255,000 machine hours and incurred actual overhead costs of $2.82 million. McDougal also had the following balances of applied overhead in its accounts:

Work in Process Inventory …………….$192,000

Finished Goods Inventory …………….. 208,000

Cost of Goods Sold ……………………600,000

Required:

1. Compute a predetermined overhead rate for McDougal.

2. Compute the overhead variance, and label it as under or overapplied.

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

4. Assuming the overhead variance is material, prepare the journal entry that appropriately disposes of the overhead variance at the end of the year.

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