Pilgrim Company applies overhead on the basis of machine hours. Given the following data, compute overhead applied and the under - or overapplication of overhead for the period:Estimated annual overhead cost $1,200,000Actual annual overhead cost $1,150,000Estimated machine hours 300,000Actual machine hours 280,000 a. $1,120,000 applied and $30,000 underapplied. b. $1,120,000 applied and $30,000 overapplied. c. $1,150,000 applied and neither under - nor overapplied. d. $1,200,000 applied and $30,000 overapplied.

Question

Business

Clare Rodgers

10 May, 08:33

Pilgrim Company applies overhead on the basis of machine hours. Given the following data, compute overhead applied and the under - or overapplication of overhead for the period:Estimated annual overhead cost $1,200,000Actual annual overhead cost $1,150,000Estimated machine hours 300,000Actual machine hours 280,000 a. $1,120,000 applied and $30,000 underapplied. b. $1,120,000 applied and $30,000 overapplied. c. $1,150,000 applied and neither under - nor overapplied. d. $1,200,000 applied and $30,000 overapplied.

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Answers (1)

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Atticus · Answer 1

Option (b) is correct.

Explanation:

Given that,

Estimated annual overhead cost = $1,200,000

Actual annual overhead cost = $1,150,000

Estimated machine hours = 300,000

Actual machine hours = 280,000

Overhead Applied:

= (Estimated annual overhead cost : Estimated machine hours) * Actual machine hours

= ($1,200,000 : 300,000) * 280,000

= $1,120,000

Overhead over applied:

= Actual annual overhead cost - Overhead Applied

= $1,150,000 - $1,120,000

= $30,000