Question

Acheson Corporation, which applies manufacturing overhead on the basis of machine-hours, has provided the following data for its most recent year of operations. Estimated manufacturing overhead $ 157,050 Estimated machine-hours 4,500 Actual manufacturing overhead $ 156,000 Actual machine-hours 4,580 The estimates of the manufacturing overhead and of machine-hours were made at the beginning of the year for the purpose of computing the company's predetermined overhead rate for the year. The overhead for the year was:

Answer 1

Answer:

Over-applied by $3,842

Explanation:

If, Applied Overheads > Actual Overheads, overheads have been overapplied.

and

Since, Applied Overheads < Actual Overheads, overheads have been under- applied.

Applied Overheads = Predetermined rate x Actual Activity

where,

Predetermined rate = Budgeted Overheads  ÷ Budgeted Activity

therefore,

Predetermined rate = $ 157,050 ÷ 4,500

                                  = $34.90

Applied Overheads = $34.90 x 4,580 = $159,842

Since, Applied Overheads > Actual Overheads, overheads have been overapplied.

Over-applied overheads = $159,842 - $ 156,000 = $3,842