If Actual Overhead for the Year Is $33,451 and Applied

question 196

Essay

If actual overhead for the year is $33,451 and applied overhead is $32,000, is the overhead variance overapplied or underapplied? Prepare the journal entry necessary to reconcile overhead. Assume the variance is immaterial.

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Definitions:

High-Low Method

An accounting technique used to estimate the fixed and variable costs associated with producing goods or services by analyzing the highest and lowest levels of activity.

Variable Cost

Costs that vary directly with the level of production or volume of output, such as materials and labor directly involved in manufacturing.

Scatter Diagram

A graphical representation used to show the relationship between two variables, often to identify potential correlations or patterns.

Least-Squares Regression

The least-squares regression is a statistical method used to determine a line of best fit by minimizing the sum of squares created by a mathematical function.