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 $11,847,311 and that total machine hours will be 183,976 hours. Year to date, the actual overhead is $7,816,056 and the actual machine hours are 83,639 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 over/under applied by?

Select the correct answer.

$4,031,255 under $2,430,042 under $2,430,042 over $4,031,255 over

Explanation / Answer

Total Overhead 11847311 Total Machine Hours 183976 Predetermined Overhead Rate 64.40 Total Overhead 7816056 Total Machine Hours 83639 Actual Overhead Rate 93.45 Overhead Applied =64.40*83639 5386014 Actual Overhead is more than applied overhead So Overhead is underapplied by =7816056-5386352 2430042

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