Question

Winston Company estimates that the factory overhead for the following year will be $1,159,400. The company has decided that the basis for applying factory overhead should be machine hours, which is estimated to be 34,100 hours. The total machine hours for the year were 54,200 hours. The actual factory overhead for the year was $1,869,000. Enter the amount as a positive number. a. Determine the total factory overhead amount applied. $ b. Calculate the over- or underapplied amount for the year. $

Answer 1

Answer:

a. the total factory overhead amount applied is $ 1,842,800

b. Under-applied Overheads is $ 26,200

Explanation:

Applied Overheads

Are the Overheads costs accumulated in product cost for the year.

Applied Overheads = Predetermined Overhead Rate × Actual Activity

where Predetermined Overhead Rate = Budgeted Overheads / Budgeted Activity.

Predetermined Overhead Rate = $1,159,400/34,100 machine hours

                                                      = $34 per  machine hour

Applied Overheads = $34 × 54,200 machine hours

                                  =  $ 1,842,800

Over- or Underapplied

Is the difference between Actual factory overhead and Applied factory Overheads

Actual factory overhead  = $1,869,000

Applied factory Overheads = $ 1,842,800

Actual factory overhead  ($1,869,000) >Applied factory Overheads ($ 1,842,800), thus we have an under-applied situation.

Under-applied Overheads = $1,869,000 - $ 1,842,800

                                            = $ 26,200