Question

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?

Answer 1

Overapplied overhead is $1,000.

Step-by-step 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.