Answer:
Compute overhead applied and the under- or overapplication of overhead for the period
Budgeted Rate = $1,600,000/ 400,000 machine hours
= $ 4 per Machine Hour
Overheads Applied = 390,000 × $ 4 per Machine Hour
= 1,560,000
Actual Overheads = 1,575,000
Less Applied Overheads = 1560,000
Under- Applied = 15,000
Explanation:
<u>Overheads are Applied as follows:</u>
Actual Activity for the period × Budgeted Overhead Rate
<u>Budgeted Rate is determined as follows:</u>
Budgeted Total Overheads/Budgeted Activity
<u>Under- or Overapplication of overhead is determined as follows:</u>
Actual Overheads - Applied Overheads
Under Application is therefore : Actual Overheads > Applied Overheads
Over Application is therefore : Actual Overheads < Applied Overheads
