Overhead Variance (Over- or Underapplied), Closing to Cost of Goods Sold

At the end of the year, Ilberg Company provided the following actual information:

Overhead $423,600
Direct labor cost 532,000
Ilberg uses normal costing and applies overhead at the rate of 80% of direct labor cost. At the end of the year, Cost of Goods Sold (before adjusting for any overhead variance) was $1,890,000.

Dispose of the overhead variance by adjusting Cost of Goods Sold. Adjusted COGS $

Calculate the overhead variance for the year. $

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khaqanelahi khaqanelahi · Answer 1 · 2020-01-16T13:51:17+01:00

Answer:

This question has two requirements answer of each requiremnt is given below.

Dispose of the overhead variance by adjusting Cost of Goods Sold. Adjusted COGS $____

Applied Overhead = 532,000 * 80% =$ 425,600

This show that overhead are over apllied, so

Adjusted COGS = $1,890,000 - (425,600 -423,600)

= $ 1,888,000

Calculate the overhead variance for the year. $____

Overhead variance = Applied Overhead - Actual Overhead

= 425,600 -423,600

= $ 2000 (Favorable variance)