Question

Exercise 181 (Part Level Submission) Gallagher Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total $425,000 for the year, and machine usage is estimated at 125,000 hours. For the year, $450,000 of overhead costs are incurred and 130,000 hours are used. Compute the manufacturing overhead rate for the year. (Round answer to 2 decimal places, e.g. 52.75) Overhead rate per machine hour

Answer 1

(a) Overhead rate = $425,000 / 125,000 = $3.40 per machine hour

(b)

Actual machine hours	130,000
Standard rate	× $3.40
Applied overhead	$442,000
Incurred overhead	$450,000
Underapplied overhead	$8,000