Question

The Thomlin Company forecasts that total overhead for the current year will be $11,485,000 with 153,000 total machine hours. Year to date, the actual overhead is $7,533,000 and the actual machine hours are 92,000 hours. If the Thomlin Company uses a predetermined overhead rate based on machine hours for applying overhead, as of this point in time (year to date), the overhead is Round the factory overhead rate to the nearest dollar before multiplying by the number of hours. a.$822,900 underapplied b.$822,900 overapplied c.$633,000 underapplied d.$633,000 overapplied

Answer 1

Answer:

Overhead underapplied = $626,560

Explanation:

Given that,

Forecasted total overhead for the current year = $11,485,000

Estimated machine hours = 153,000

Actual overhead = $7,533,000

Actual machine hours = 92,000 hours

Predetermined Overhead rate:

= Budgeted Overhead Expense ÷ Budgeted Machine Hours

= $11,485,000 ÷ 153,000

= $75.07 per machine hour

Overhead applied:

= Actual machine hours × Predetermined Overhead rate

= 92,000 hours × $75.07 per machine hour

= $6,906,440

Therefore,

Overhead underapplied:

= Actual overhead - Overhead applied

= $7,533,000 - $6,906,440

= $626,560