Overhead applied vs overhe ad actually incurred Example: Heller anery, Inc., use

ID: 2539734 • Letter: O

Question

Overhead applied vs overhe ad actually incurred Example: Heller anery, Inc., uses a predetermined overhead rat (POHR) based o machine-hours to apply mhufacturing ovethead to jobs. The com pany estimated that it would inc $S10,000 in manufacturing overhead during the year and that it capacity of 100,000 machine-hours. The company act 105,000 machine-hours and incurred S$540,000 in manuf overhead costs. By how much was manufacturing overhead underapplied or overapplied for the year? a. $4,500 overapplied b. $4,500 underapplied c. $30,000 overapplied d. $30,000 underapplied ctical

Explanation / Answer

Over applied overheads

Applied overheads>Actual overheads

Under applied overheads

Applied overheads < Actual overheads

Budgeted overhead cost (A)

$510,000

No of units budgeted (B)

100,000

Budgeted overhead rate per unit (C=A/B)

$5.10

Actual units produced (D)

105,000

Overheads applied for actual units (105,000*$5.10) (E=C*D)

$535,500

Less: Actual overheads (F)

$540,000

Under applied overheads (G=E-F)

($4,500)

Ans

Option (B) $4,500 under applied is correct