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 $5.7 million, and the practical level of activity is 375,000 machine hours.
During the year, Craig used 382,500 machine hours and incurred actual overhead costs of $5.73 million. Craig also had the following balances of applied overhead in its accounts:
Work-in-process inventory $576,000
Finished goods inventory 624,000
Cost of goods sold 1,800,000
Requried:
a. Compute a predetermined overhead rate for Craig.
b. Compute the overhead variance, and label it as under- or overapplied.
Answers: 2
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Craig Company uses a predetermined overhead rate to assign overhead to jobs. Because Craig's product...
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