Question

. Oscar Co. 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 $1,155,000Estimated machine hours 400,000Actual machine hours 380,000

Answer 1

15,000 underapplied

Step-by-step explanation:

We will calculate the applied overhead but first, we need the predetermined overhead rate:

`(Cost\: Of \:Manufacturing \:Overhead)/(Cost \:Driver)= Overhead \:Rate`

the expected overhead will be divided by the cost driver which is machine hours.

1,200,000 / 400,000 = 3

now we multiply by the actual output of machienhours:

380,000 x 3 = 1,140,000

lastly, we compare with the actual overhead cost:

1,140,000 - 1,155,000 = 15,000

as the actual cost were higher than applied we underapplied the overhead.