[Mathis27]

I have been on this one problem for a while now, it is my last one and for some reason it's just not clicking for me, can anybody help me out? Need an explanation of how to get the answer. Thanks.

Speedy Shoe Factory manufactures running shoes. Overhead is applied to the shoes based on direct labor hours. Last year, total overhead costs were expected to be $72,000. Actual overhead costs totaled $80,000 for 8,000 actual hours. At the end of the year, overhead was underapplied by $5,000.

A.) Calculate The predetermined overhead rate.

[Mathis27]

By the way I know POHR is = to estimated overhead cost / estimated cost drive. I just can't figure out the cost driver part. I know that $80,000 will end up being the applied overhead, just can't put everything together to get POHR.

[morgaine300]

Never seen one like this before. Had to think about it a minute. But this is just one of those typical "work backwards and find the missing number" things, which serve no real purpose as far as I'm concerned.

The $80,000 isn't the applied overhead. That's actual. You're solving for applied.

Make yourself a t account for overhead. Actual overhead goes in as a debit. What's missing is the credit coming back out that was applied to WIP. So leave that blank. Over or underapplied overhead is the balance that will be in that account after applying the overhead. So the 5000 is the ending balance. If it's underapplied, will it be a debit or credit?

Now, how do you get from $80,000 actual costs to that ending balance? That number is your applied overhead.

You don't have to do the t account, but it'll help create a visual for you. Once you see how it was done, you may be able to just it in your head from then on.

If you get that, I think you'll solve it from there.