Problem - Aaron, I like your analysis! At the beginning of 2010, Zuir Company's accounting department calculated the following estimates for the coming year's production:
Estimated overhead $441,600
Direct labor hours 9,200 hr
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?