Question

The Winston Company estimates that the factory overhead for the following year will be $1,250,000. The company has decided that the basis for applying factory overhead should be machine hours, which is estimated to be 50,000 hours. The total machine hours for the year was 54,300. The actual factory overhead for the year was $1,375,000. Determine the over or under applied amount for the year.

Answer 1

Answer:

Over Applied = $1,375,000 - $1,357,500 = $17,500

Explanation:

Basis of overhead decided = $1,250,000/50,000 machine hours = $25 per machine hour

Actual Factory overhead = $1,375,000

Actual machine hours = 54,300

Absorption rate = $1,375,000/54,300 = $25.32

Therefore for 54,300 machine hours overhead shall be = 54,300 X $25 = $1,357,500

Over Applied = $1,375,000 - $1,357,500 = $17,500