Cornerstones of Managerial Accounting 6th Edition by Maryanne Mowen,Don Hansen ,Dan Heitger

Exercise 59

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, Horvath Company estimated the following:

Horvath uses normal costing and applies overhead on the basis of direct labor hours. For the month of January, direct labor hours were 7,830. By the end of the year, Horvath showed the following actual amounts:

Assume that unadjusted Cost of Goods Sold for Horvath was $707,000.
Required:
1. Calculate the predetermined overhead rate for Horvath.
2. Calculate the overhead applied to production in January. ( Note : Round to the nearest dollar.)
3. Calculate the total applied overhead for the year. Was overhead over- or underapplied? By how much?
4. Calculate adjusted Cost of Goods Sold after adjusting for the overhead variance.