Question

Question 27 A company expected its annual overhead costs to be $745500 and machine hours to equal 105000 hours. Actual overhead was $740000, and actual machine hours totalled 96000 hours. How much overhead was over or underapplied? O $58400 underapplied O O $63900 underapplied $69000 over-applied O $5920 underapplied

Answer 1

Answer: Option-(a): $58400 underapplied Reason: Estimated annual overhead cost $745,500 Estimated annual machine hours 105,000 Pre-determined overhead cost per machine hour $7.1 ($745500 / 105000 machine hours] Actual machine hours worked 96,000 Overhead cost applied during the year $681,600 196000 machine hours x $7.1] Actual overhead cost recorded during the year $740,000 Under-applied factory overhead cost $58,400 [$740000 - $681600] (It is under-applied because applied overhead cost is less than actual overhead cost incurred)