Question

Reyes Corporation applies overhead using a normal costing approach based upon machine-hours. Budgeted factory overhead was $266,400, budgeted machine-hours were 18,500. Actual factory overhead was $287,920, actual machine-hours were 19,050. How much is the over- or underapplied overhead

Answer 1

Under/over applied overhead= 13,600 underapplied

Step-by-step explanation:

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= 266,400/18,500

Predetermined manufacturing overhead rate= $14.4 per machine hour

Now, we can allocate overhead:

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

Allocated MOH= 14.4*19,050

Allocated MOH= $274,320

Finally, the over/under allocation:

Under/over applied overhead= real overhead - allocated overhead

Under/over applied overhead= 287,920 - 274,320

Under/over applied overhead= 13,600 underapplied