Question

Kubal Inc. applies overhead based on machine hours. Kubal reports the following for the year just ended: Budgeted overhead for the year $280,000 Budgeted machine hours 2,000 Actual overhead for the year $305,000 Actual machine hours 2,400 What is the amount of over- or under-applied overhead for the year

Answer 1

Answer:

Under/over applied overhead= $21,000 overapplied

Explanation:

First, we need to calculate the predetermined overhead rate:

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

Predetermined manufacturing overhead rate= 280,000/2,000

Predetermined manufacturing overhead rate= $140 per machine hour

Now, we can allocate overhead:

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

Allocated MOH= 140*2,400

Allocated MOH= $336,000

Finally, the under/over allocation:

Under/over applied overhead= real overhead - allocated overhead

Under/over applied overhead= 305,000 - 336,000

Under/over applied overhead= $21,000 overapplied