Question

Overhead Variance (Over- or Underapplied), Closing to Cost of Goods SoldAt the end of the year, Ilberg Company provided the following actual information:Overhead $423,600Direct labor cost 532,000Ilberg uses normal costing and applies overhead at the rate of 80% of direct labor cost. At the end of the year, Cost of Goods Sold (before adjusting for any overhead variance) was $1,890,000.Dispose of the overhead variance by adjusting Cost of Goods Sold. Adjusted COGS $____Calculate the overhead variance for the year. $____

Answer 1

1. $2,000 over applied

2. $1,892,000

Step-by-step explanation:

The computation is shown below:

1. Overhead variance:

= Applied overhead - actual overhead

= $425,600 - $423,600

= $2,000 over applied

The applied overhead is computed below:

= Direct labor cost × overhead percentage rate

= $532,000 × 80%

= $425,600

2. So, the adjusted COGS equal to

= COGS + over applied

= $1,890,000 + $2,000

= $1,892,000