Reyes Corporation applies overhead using a normal costing approach based upon machine-hours. Budgeted factory overhead was...

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Reyes Corporation applies overhead using a normal costing approach based upon machine-hours. Budgeted factory overhead was...

Reyes Corporation applies overhead using a normal costing approach based upon machine-hours. Budgeted factory overhead was $269,280 budgeted machine hours were 18,700. Actual factory overhead was $288,920 actual machine were 19,250. How much is over or underapplied overhead?

a. $6,826 overapplied

b. $11,720 underapplied

c. $0

d. $18,546 underapplied

business accounting

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Answer 1

Answer #1

Answer is “$11,720 underapplied”

Predetermined overhead rate = Budgeted factory overhead / Budgeted machine hours
Predetermined overhead rate = $269,280 / 18,700
Predetermined overhead rate = $14.40 per machine hour

Factory overhead applied = Predetermined overhead rate * Actual machine hours
Factory overhead applied = $14.40 * 19,250
Factory overhead applied = $277,200

Underapplied factory overhead = Actual factory overhead - Factory overhead applied
Underapplied factory overhead = $288,920 - $277,200
Underapplied factory overhead = $11,720

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Answer 2

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