Problem:
(Predetermined OH rates and underapplied/overapplied OH) Davidson's Dolls had the following information in its Work in Process Inventory account for June 2010:
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Work in Process Inventory
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|
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Beginning balance
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10,000
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Transferred out
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335,000
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Materials added
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150,000
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|
|
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Labor (5,000 DLHs)
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90,000
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|
|
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Applied overhead
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120,000
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|
|
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Ending balance
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35,000
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All workers are paid the same rate per hour. Factory overhead is applied to Work in Process Inventory on the basis of direct labor hours. The only work left in process at the end of the month had a total of 2,860 direct labor hours accumulated to date.
a. What is the total predetermined OH rate per direct labor hour?
b. If actual total overhead for June is $121,500, what is the amount of underapplied or overapplied overhead?
c. Given your answer to part (b), how would you recommend the over- or underap-plied overhead be closed?