Question

Thomlin Company forecasts that total overhead for the current year will be $10,282,000 with 194,000 total machine hours. Year to date, the actual overhead is $5,689,800, and the actual machine hours are 98,100 hours. If Thomlin Company uses a predetermined overhead rate based on machine hours for applying overhead, as of this point in time (year to date), the overhead is

Answer 1

$490,500 underapplied

Step-by-step explanation:

The computation of the overhead is shown below:

But before that the predetermined overhead rate and the applied overhead is

Predetermined overhead rate is

= Estimated overhead ÷ estimated activity

= $10,282,000 ÷ 194,000

= $53 per MH

Now

Applied overhead = actual activity × overhead rate

= 98,100 hours ×$53 per MH

= $5,199,300

Now the underapplied overhead is

= $5,689,800 - $5,199,300

= $490,500 underapplied