Question

The Thomlin Company forecasts that total overhead for the current year will be $11,485,000 with 176,000 total machine hours. Year to date, the actual overhead is $7,979,000 and the actual machine hours are 89,000 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.$3,071,600 underapplied b.$2,194,000 overapplied c.$3,071,600 overapplied d.$2,194,000 underapplied

Answer 1

Answer:

Under/over applied overhead= $2,171,244 underallocated

Explanation:

Giving the following information:

The estimated total overhead= $11,485,000

Estimated machine hours= 176,000

Year to date, the actual overhead is $7,979,000 and the actual machine hours are 89,000 hours.

First, we need to calculate the predetermined manufacturing overhead rate:

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

Predetermined manufacturing overhead rate= 11,485,000/176,000

Predetermined manufacturing overhead rate= $65.25568 per machine-hour

Now, we can allocate overhead:

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

Allocated MOH= 65.25568*89,000= $5,807,756

Finally, we determine the under/over allocation:

Under/over applied overhead= real overhead - allocated overhead

Under/over applied overhead= 7,979,000 - 5,807,756= $2,171,244 underallocated