Question

1. Given the following data, answer the questions below the table:

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Data
Allocation base	Machine-hours
Estimated manufacturing overhead cost	$220,800
Estimated total amount of the allocation base	46,000	machine-hours
Actual manufacturing overhead cost	$240,100
Actual total amount of the allocation base	42,000	machine-hours

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a) What is the pre-determined overhead rate?

b) By how much is the manufacturing overhead underapplied or overapplied?

c) Change the estimated total amount of allocation base to 48,000 machine hours, now by how much is the manufacturing overhead underapplied or overapplied?

Answer 1

Predetermined Overhead rate = Estimated overhead/Estimated machine hours = 220,800/46,000 = 4.80 per machine hour

Applied overhead = 4.80 * 42,000 = 201,600 Actual overhead = 240,100 So, overhead underapplied by = 240,100 - 201,600 = 38,500 underapplied

Predetermined overhead rate = 220,800/48,000 = 4.60 per mh Applied overhead = 4.60*42000 = 193,200 Actual overhead = 240,100 So,overhead is underapplied by = 240,100 - 193,200 = 46,900 underapplied