Union Company Applies Overhead Based Upon Machine Hours Required:
A

Union Company applies overhead based upon machine hours. Budgeted factory overhead was $266,400 and budgeted machine hours were 18,500. Actual factory overhead was $287,920 and actual machine hours were 19,050. Before disposition of under/overapplied overhead, the cost of goods sold was $560,000 and ending inventories were as follows: $$\begin{array} { l l } \text { Direct materials } & \$ 60,000 \\\text { WIP } & 190,000 \\\text { Finished goods } & 250,000 \\\text { Total } & \$ 500,000\end{array}$$ Required:
a. Determine the budgeted factory- overhead rate per machine hour.
b. Compute the overapplied or underapplied overhead.
c. Assuming the variance is immaterial, give the journal entry to dispose of the variance.
d. Assuming the variance is material, give the journal entry to dispose of the variance using proration.

Correct Answer:

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a. $266,400 / 18,500 hours = $14.40 per ...

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