McCawl Company produces two products and uses a predetermined overhead rate to apply overhead. McCawl currently applies overhead using a plantwide rate based on direct labor hours. Consideration is being given to the use of departmental overhead rates where overhead would be applied on the basis of direct labor hours in department 1 and on the basis of machine hours in department 2. At the beginning of the year, the following estimates are provided:

Actual results reported by department and product during the year are as follows:

Required:
1. Compute the plantwide predetermined overhead rate, and calculate the overhead assigned to each product.
2. Calculate the predetermined departmental overhead rates, and calculate the overhead assigned to each product.
3. Using departmental rates, compute the applied overhead for the year. What is the under- or overapplied overhead for the firm?
4. Prepare the journal entry that disposes of the overhead variance calculated in Requirement 3, assuming it is not material in amount. If the variance is material, what additional information would you need to make the appropriate journalentry?

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Department 1 Direct labor hours Machine hours Overhead cost 400,000 40,000 $240,000 Department 2 80,000 120,000 $720,000 Department 1 Direct labor hours Machinc hours Overhcad cost 392,000 44,000 S250,000 Department 2 84,000 128,000 $770,000 Product A Product B Direct labor hours: Department 2 Department 1 300,000 60,000 92,000 24,000 Machine hours: 24,000 20,000 28,000 100,000 Department 2