Question

A manufacturer estimates its factory overhead costs to be $30,000 and machine hours to be 4,000 for the year. If the actual hours worked on production total 3,800 and the actual factory overhead costs are $28,000, what is the amount of the over- or underapplied factory overhead?

a) $500 overapplied
b) $500 underapplied
c) $2,000 overapplied
d) $2,000 underapplied

Answer 1

To calculate the over- or underapplied factory overhead, subtract the actual factory overhead costs from the estimated factory overhead costs. In this case, the amount is $2,000 overapplied.

Step-by-step explanation:

To calculate the amount of over- or underapplied factory overhead, we need to compare the estimated factory overhead costs to the actual factory overhead costs.

Estimated factory overhead costs: $30,000

Actual factory overhead costs: $28,000

Overapplied factory overhead = Estimated factory overhead costs - Actual factory overhead costs = $30,000 - $28,000 = $2,000

Therefore, the amount of overapplied factory overhead is $2,000. The correct answer is (c) $2,000 overapplied.