Question: The Bartolotta Company had an overabsorbed overhead balance at year
The Bartolotta Company had an overabsorbed overhead balance at year- end. The firm wrote off one- third of it to Cost of Goods Sold, thereby raising net income by $ 100,000, and the remainder was charged to inventory accounts. Overhead is allocated to products using direct labor dollars. The firm uses a flexible budget to calculate its overhead rate. Before the year began, the variable overhead rate and budgeted volume were estimated to be $ 7.00 per direct labor dollar and $ 1 million, respectively. Actual overhead incurred for the year was $ 9.7 million, and actual direct labor cost was $ 1,250,000. What budgeted fixed overhead amount did the Bartolotta Company use in calculating the overhead rate?
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