Assuming the overhead variance is material prepare the

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Reference no: EM13597064

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 ant 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.

Reference no: EM13597064

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