Question

The Thomlin Company forecasts that total overhead for the current year will be $11,270,000 with 161,000 total machine hours. Year to date, the actual overhead is $7,987,000 and the actual machine hours are 85,000 hours. The predetermined overhead rate based on machine hours is Round the factory overhead rate to the nearest dollar before multiplying by the number of hours.
a. $3,342,000 overapplied
b. $2,228,000 underapplied
c. $2,228,000 overapplied
d. $3,342,000 underapplied

Answer 1

Answer:

underapplied for 2.037.000‬

Explanation:

$\frac{Cost\: Of \:Manufacturing \:Overhead}{Cost \:Driver}= Overhead \:Rate$

we divide the expected overhead by the expected machine hours:

11,270,000 / 161,000 = $70

applied overhead = actual machine hours x rate

85,000 MH x $70 = 5,950,000

actual overhead       7,987,000

As we applied less than actual cost we underapplied the overhead.

7,987,000 - 5,950,000 = 2.037.000‬