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2 July, 21:47

Tom's Tool & Die uses a predetermined factory overhead rate based on machine-hours. For August, Tom's budgeted overhead was $234,000 based on a budgeted volume of 39,000 machine-hours. Actual overhead amounted to $230,000 with actual machine-hours totaling 38,500What was over - or underapplied manufacturing overhead in August?

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  1. 2 July, 21:53
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    Overapplied overhead is $1,000.

    Explanation:

    predetermined factory overhead rate=Budgeted overhead/Budgeted volume

    = (234,000/39.000) = $6/machine hour

    Hence applied overhead = predetermined factory overhead rate*Actual volume

    = (6*38.500) = $231.000

    Hence since applied overhead is greater than actual overhead;

    overapplied overhead = (231,000-230.000) = $1,000.
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