Question

Bramble Corp. 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$1500000 Actual annual overhead cost$1475000 Estimated machine hours400000 Actual machine hours190000 $1500000 applied and $762500 overapplied $1475000 applied and neither under-nor overapplied $712500 applied and $762500 underapplied $712500 applied and $762500 overapplied

Answer 1

Overheads Applied = $712,500

Overheads Under-applied = $762,500

Step-by-step explanation:

Predetermined Overhead rate = Estimated Annual Overhead ÷ Estimated machine hours

= $1,500,000 ÷ 400,000

= $3.75

Applied Overheads = Predetermined Overhead rate × Actual Machine hours

= $3,75 × 190,000

= $712,500

If Actual Overheads > Applied Overheads, we say we have under-applied overheads

and

If Actual Overheads < Applied overheads, we say we have over-applied overheads

In this case :

Actual Overheads = $1,475,000

Applied Overheads = $712,500

Therefore we have under-applied situation of $762,500 ($1,475,000 - $712,500)