Question

The Thomlin Company forecasts that total overhead for the current year will be $11,100,000 with 160,000 total machine hours. Year to date, the actual overhead is $7,950,000 and the actual machine hours are 81,000 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

Answer 1

Answer:

Results are below.

Explanation:

First, we need to calculate the predetermined overhead rate:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Predetermined manufacturing overhead rate= 11,100,000/160,000

Predetermined manufacturing overhead rate= $69.375 per machine hour

Now, we can allocate overhead:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Allocated MOH= 69.375*81,000

Allocated MOH= $5,619,375

Finally, we can determine the under/over allocation:

Under/over applied overhead= real overhead - allocated overhead

Under/over applied overhead= 7,950,000 - 5,619,375

Under/over applied overhead= $2,330,625 underallocated