Question

	A B C
1 2 3 4 5 6 7 8	Chapter 3: Applying Excel Data Allocation base Machine-hours Estimated manufacturing overhead cost $290,700 Estimated total amount of the allocation base 57,000 machine-hours Actual manufacturing overhead cost $273,700 Actual total amount of the allocation base 60,000 machine-hours

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

(b) Why is the amount of underapplied (overapplied) manufacturing overhead different from Requirement 2 above? (you can select one or more)

• The predetermined overhead rate changed.unchecked
• The change in the actual manufacturing overhead cost directly resulted in a comparable change in the amount of underapplied (overapplied) manufacturing overhead.unchecked
• The change in the estimated total amount of the allocation base affected the amount of manufacturing overhead applied.

Answer 1

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

Given,

Estimated manufacturing overhead cost = $290,700

Estimated total amount of the allocation base = 57.000 machine hours

So estimated per hour manufacturing overhead cost = 290,700/57,000 = $ 5.1 per hour

given Actual total amount of the allocation base = 60,000 machine hours

So applied overhead cost = 5.1 x 60,000 = $ 306,000

(Applied overhead cost = Estimated per hour manufacturing over head x Actual machine hours)

Given Actual manufacturing overhead cost = $273,700

Since APPLIED OVERHEAD COST > ACTUAL OVERHEAD COST manufacturing overheads are over applied by the amount of $ 32,300 ( 306,000-273,700)

Final answer : Manufacturing overheads are overapplied by the amount of $ 32,300

(b) Why is the amount of underapplied (overapplied) manufacturing overhead different from Requirement 2 above?

The amount of overapplied overhead is different is due to the change in the estimated total amount of the allocation base affected the amount of manufacturing overhead applied.