Question

Check your worksheet by changing the estimated total amount of the allocation base in the Data area to 50,000 machine-hours, keeping all of the other data the same as in the original example. If your worksheet is operating properly, the predetermined overhead rate should now be $6.00 per machine-hour. If you do not get this answer, find the errors in your worksheet and correct them. g

Answer 1

Data

Allocation Base Machine Hours

Estimated manufacturing overhead cost $300,000

Estimated total amount of allocation base 75,000 machine hours

Actual manufacturing overhead cost $290,000

Actual total amount of the allocation base 68,000 machine hours

Computation of predetermined overhead rate

Estimated manufacturing overhead cost $300,000

Estimated total amount of allocation base 75,000 machine hours

Predetermined overhead rate $4 per machine hour

= 300,000/75,000

= $4

Computation of underapplied or overapplied manufacturing overhead

Actual manufacturing overhead cost $290,000

Manufacturing overhead cost applied to WIP during the year:

Predetermined overhead rate $4 per machine hour

Actual total amount of allocation base 68,000 machine hours

Manufacturing overhead applied $272,000

= 68,000 * 4 = $272,000

Underapplied (overapplied) manufacturing $18,000 underapplied

overhead