The Thomlin Company forecasts that total overhead for the current year will be $

Question

The Thomlin Company forecasts that total overhead for the current year will be $11,768,000 with 196,000 total machine hours. Year to date, the actual overhead is $7,518,000 and the actual machine hours are 98,000 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.

$1,638,000 overapplied

$2,293,200 underapplied

$1,638,000 underapplied

$2,293,200 overapplied

Explanation / Answer

Factory overhead rate = Estimated total overhead/Estimated machine hours = 11768000/196000= $60 Factory overhead applied = 98000*60= $5880000 Underapplied factory overhead = 7518000-5880000 = $1638000 Option $1,638,000 underapplied is correct

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