Question

The Thomlin Company forecasts that total overhead for the current year will be $11,420,000 with 157,000 total machine hours. Year to date, the actual overhead is $7,958,000 and the actual machine hours are 83,000 hours. If the 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 Round the factory overhead rate to the nearest dollar before multiplying by the number of hours. a.$2,848,500 underapplied b.$1,899,000 underapplied c.$1,899,000 overapplied d.$2,848,500 overapplied

Answer 1

Under/over applied overhead= $1,899,000 underallocated

Step-by-step explanation:

Giving the following information:

Estimated overhead= $11,420,000

Estimated machine-hours= 157,000

Actual overhead is $7,958,000 and the actual machine hours are 83,000 hours.

First, we need to calculate the predetermined overhead rate:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Predetermined manufacturing overhead rate= 11,420,000/157,000

Predetermined manufacturing overhead rate= $73 per machine hour

Now, we can allocate overhead:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Allocated MOH= 73*83,000= $6,059,000

Finally, we can determine the under/over allocation:

Under/over applied overhead= real overhead - allocated overhead

Under/over applied overhead= 7,958,000 - 6,059,000

Under/over applied overhead= $1,899,000 underallocated