The Winston Company estimates that the factory overhead for the following year will be $1,250,000. The company has decided that the basis for applying factory overhead should be machine hours, which is estimated to be 50,000 hours. The total machine hours for the year were 54,300. The actual factory overhead for the year were $1,375,000. Determine the over - or underapplied amount for the year.

Question

Business

Rocco Frost

1 November, 12:46

The Winston Company estimates that the factory overhead for the following year will be $1,250,000. The company has decided that the basis for applying factory overhead should be machine hours, which is estimated to be 50,000 hours. The total machine hours for the year were 54,300. The actual factory overhead for the year were $1,375,000. Determine the over - or underapplied amount for the year.

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Deja Choi · Answer 1

The under applied overhead is $17,500

Explanation:

The computation is shown below:

First, Calculate the predetermined overhead rate per hour which equals to

= (Estimated Overhead cost : estimated machine hours)

= ($1,250,000 : 50,000 hours)

= $25 per hour

So, the applied overhead equals to

= Predetermined overhead rate per hour * actual machine hours

= $25 per hour * 54,300 hours

= $1,357,500

So, the over/under applied overhead equals to

= Applied overhead - actual overhead

= $1,357,500 - $1,375,000

= $17,500 under applied