ABC Corporation, which applies manufacturing overhead on the basis of machine-hours, has provided the following data for its year 2016 operations:
Estimated manufacturing overhead $239,500
Estimated machine-hours 4,500
Actual manufacturing overhead $241,900
Actual machine hours 5,500
Use the data to answer the following questions (1 - 4) in details along with the steps and formulas.
1. The predetermined overhead rate would be:
2. The applied manufacturing overhead for the year is:
3. Was the overhead for the year over applied or under applied? By how much?
4. When the difference in overhead is closed out to cost of goods sold (COGS), will it increase COGS or decrease COGS? What is the effect on final net income?