Question

Reyes Corporation applies overhead using an actual costing approach. Budgeted factory overhead was $271,296, budgeted machine-hours were 18,840. Actual factory overhead was $289,620, actual machine-hours were 19,390. How much overhead would be applied to production

Answer 1

$279216

Step-by-step explanation:

Budgeted rate =
`(Budgeted factory overhead)/(Budgeted Machine Hours)` =
`(271296)/(18840)` = 14.4

Budgeted factory overhead = $271296

Budgeted Machine hours = 18840

Actual overhead cost = $289620

Allocated overhead cost = actual hours * budgeted rate

= 19390 * 14.4 = $279216

from the calculations it is noted that the allocated overhead cost is lower than the actual overhead cost incurred by the corporation hence the overhead cost was underapplied

actual overhead cost - allocated overhead cost

Answer 2

Overhead of $279,216 is applied to production

Step-by-step explanation:

Over head applied to the production is based on the predetermined overhead rate. The formula for predetermined overhead rate formula is

Predetermined overhead rate = Budgeted overhead / Budgeted activity

Predetermined overhead rate = Budgeted overhead / Machine Hours

Predetermined overhead rate = $271296 / 18,840

Predetermined overhead rate = $14.4 per machine hour

Actual machine hours = 19,390 machine hours

Overhear applied to the production = Predetermined overhead rate x Actual Machine hours

Overhear applied to the production = $14.4 x 19,390= $279,216