At the beginning of 2010, Zuir Company's accounting department calculated the following estimates for the coming year's production:
$\begin{array}{lr}
\text { Estimated overhead } & \$ 441,600 \
\text { Direct labor hours } & 9,200 \mathrm{hr}
\end{array}$
During the year, Zuir Company experienced $440,000 in actual overhead costs and actually worked 9,100 direct labor hours. Zuir applies overhead to production using a predetermined overhead rate based on direct labor hours.
a. Calculate the predetermined overhead rate Zuir uses to apply overhead. (Show your computations.)
b. By what amount was overhead over- or underapplied for 2010? (Show your computations.)
c. Assuming the amount of over- or underapplied overhead is not significant, will the Cost of Goods Sold account be increased or decreased to correct the application of overhead?

Question

At the beginning of 2010, Zuir Company's accounting department calculated the following estimates for the coming year's production:
 $\begin{array}{lr}
 \text { Estimated overhead } & \$ 441,600 \
\text { Direct labor hours } & 9,200 \mathrm{hr}
\end{array}$ 
During the year, Zuir Company experienced $440,000 in actual overhead costs and actually worked 9,100 direct labor hours. Zuir applies overhead to production using a predetermined overhead rate based on direct labor hours. 
a. Calculate the predetermined overhead rate Zuir uses to apply overhead. (Show your computations.)
b. By what amount was overhead over- or underapplied for 2010? (Show your computations.)
c. Assuming the amount of over- or underapplied overhead is not significant, will the Cost of Goods Sold account be increased or decreased to correct the application of overhead?

Quizplus · Accepted Answer

The Answer of At the beginning of 2010, Zuir Company's accounting department calculated the following estimates for the coming year's production:
 $\begin{array}{lr}
 \text { Estimated overhead } & \$ 441,600 \
\text { Direct labor hours } & 9,200 \mathrm{hr}
\end{array}$ 
During the year, Zuir Company experienced $440,000 in actual overhead costs and actually worked 9,100 direct labor hours. Zuir applies overhead to production using a predetermined overhead rate based on direct labor hours. 
a. Calculate the predetermined overhead rate Zuir uses to apply overhead. (Show your computations.)
b. By what amount was overhead over- or underapplied for 2010? (Show your computations.)
c. Assuming the amount of over- or underapplied overhead is not significant, will the Cost of Goods Sold account be increased or decreased to correct the application of overhead?