Question

Boston, Inc. applies manufacturing overhead at the rate of $40 per machine hour. Budgeted machine hours for the current period were anticipated to be 120,000; however, a lengthy strike resulted in actual machine hours being worked of only 90,000. Budgeted and actual manufacturing overhead figures for the year were $4,800,000 and $4,180,000, respectively. On the basis of this information, the company's year-end overhead was:

Answer 1

Answer:

$580,000 underapplied

Explanation:

The computation of the ending overhead is shown below:

The applied overhead is

= Predetermined overhead rate × actual machine hours

= $40 × 90,000

= $3,600,000

Now the underapplied overhead is

= $4,180,000 - $3,600,000

= $580,000

So the ending overhead is $580,000 underapplied