Question

Kimble Company applies overhead on the basis of machine hours. Given the following data, compute overhead applied and the under- or overapplication of overhead for the period: Estimated annual overhead cost $1,600,000 Actual annual overhead cost $1,575,000 Estimated machine hours 400,000 Actual machine hours 390,000.

Answer 1

Answer:

overhead rate $4 per machien hour

applied overhead 1,560,000

The overhead was underapplied for 15,000

entry to adjust against COGS

Cost of Goods of sold   15,000 debit

            Factory overhead      15,000 credit

Explanation:

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

we divide the expected overhead over the total amount of budgeted machine hours to determinate the overhead rate:

1,600,000 / 400,000 =  $4 per machine hours

Actual machine hours 390,0000

applied overhead:

actual cost driver x  rate per driver

390,000 x $4 = 1,560.000‬ applied overhead

Actual overhead 1,575,000

As aplies is lower, we should adjust for 15,000 difference