Question

Icy Mocha Company estimates its factory overhead costs to be $35,000 and machine hours to be 5,000 for the year. If the actual hours worked on Jobs 333 and Jobs 334 total 4,980 and actual factory overhead costs are $34,700, what is the amount of either over- or underapplied factory overhead?
a) underapplied $300
b) overapplied $300
c) underapplied $160
d) overapplied $160

Answer 1

Answer:

d) overapplied $160

Explanation:

$\frac{Cost\: Of \:Manufacturing \:Overhead}{Cost \:Driver}= Overhead \:Rate$

$35,000 expected overhead / 5,000 machine= 7 dollar per machine hour are spend on overhead

applied overhead:

4,980 x 7 = 34,860

actual overehad: 34,700

As the amount of cost enter by the accounting are above the real cost, we are going to increase the manufacturing overhead cost and making the net income lower for this particular reason.