Question

Thomlin Company forecasts that total overhead for the current year will be $15,000,000 with 300,000 total machine hours. Year to date, the actual overhead is $16,000,000 and the actual machine hours are 330,000 hours. If 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 a.$500,000 overapplied b.$500,000 underapplied c.$1,000,000 overapplied d.$1,000,000 underapplied

Answer 1

Answer:

a. $500,000 overapplied

Explanation:

Thomlin Company uses machine hours to calculate predetermined overhead rate. The predetermined overhead rate based on forecast was;

$15,000,000 / 300,000 machine hours = $50 per machine hour

The current overheads based on predetermined overhead rate :

330,000 machine hours * $50 per machine hour = $16,500,000

Actual overheads for the year = $16,000,000

Difference between allocated and actual overheads:

$16,500,000 - 16,000,000 = $500,000 overapplied.