Question

The Thomlin Company forecasts that total overhead for the current year will be $11,415,000 with 180,000 total machine hours. Year to date, the actual overhead is $7,948,000 and the actual machine hours are 88,000 hours. If the Thomlin Company uses a predetermined overhead rate based on machine hours for applying overhead, as of this point in time (year to date), the overhead is Round the factory overhead rate to the nearest dollar before multiplying by the number of hours.
a. $1,000,000 over
b. $1,000,000 under
c. $500,000 over
d. $500,000

Answer 1

Answer:

Underapplied overhead = $2,367,040

Explanation:

Predetermined overhead rate = Estimated overhead / Estimated activity

Predetermined overhead rate = $11,415,000 / 180,000

Predetermined overhead rate = $63.42 per MH

Applied overhead = Actual activity * Overhead rate

Applied overhead = 88,000 * $63.42 per MH

Applied overhead = $5,580,960

Overapplied/ (underapplied) = Actual overhead - Applied overhead

Underapplied overhead = $7,948,000 - $5,580,960

Underapplied overhead = $2,367,040