Question

Cavy Company estimates that the factory overhead for the following year will be $1,069,600. The company has decided that the basis for applying factory overhead should be machine hours, which is estimated to be 19,100 hours. The machine hours for the month of April for all of the jobs were 2,680. If the actual factory overhead for April totaled $153,682, determine the over- or underapplied amount for the month. Enter the amount as a positive number.

Answer 1

Predetermined Overhead rate= Predetermined Overhead / Machine Hours

=1069600/19100

= $ 56 per hour

Actual Overhead = 153,682

Overhead Applied = Predetermined Overhead rate * machine hours for April

= $ 56 per hour * 2,680 Hours

= $ 150,080

Since the overhead applied is less than the actual overhead, the overhead is under applied.

under applied overhead = $ 153682-150080

= $ 3602

Answer : $ 3602 , Underapplied