Question

Madison Manufacturing produces pool and other types of game tables. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of machine-hours. The predetermined overhead rate was based on a cost formula that estimates $1,068,000 of total manufacturing overhead for an estimated activity level of 89,000 machine-hours. During the year, a large quantity of pool and poker tables and tables on the market resulted in cutting back production and a buildup of tables in the company's warehouse. The company's cost records revealed the following actual machine hours and manufacturing overhead cost for the year: Machine-hours Manufacturing overhead cost 74,000 $ 1,029,000 Required: 1. Compute the underapplied or overapplied overhead. Complete this question by entering your answers in the tabs below. Req 1 Compute the underapplied or overapplied overhead. Req 1 next > Underapplied overhead cost Overapplied overhead cost

Answer 1

Answer
Estimated manufacturing overhead	$1,068,000
Divide by Estimated Machine hours	$     89,000
Predetermined overhead rate	$            12	1068000/89000
Manufacturing overhead cost	$1,029,000
Less: Overhead applied	$   888,000	74000*12
Underapplied overhead	$   141,000

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