The answer to this question is $4,192,500 applied and $77,500 under applied. To get this take the estimated annual overhead cost ($4,300,000) and divide that by the estimated machine hours (200,000). This gets you the hourly rate of the machine (4,300,000 / 200,000 = $21.50) now multiple the hourly rate ($21.50) by actual machine hours (195,000) and you will get ($21.50 * 195,000 = $4,192,500) This is your applied overhead. Now subtract the applied overhead from the estimated overhead and you will come out with the amount that was over/under applied ($4,270,000 - $4,192,500 = $77,500) because this number is positive this means that the actual is greater than the estimated overhead and that estimated overhead is underapplied.
Answer: $4,192,500 applied and $775,000 overapplied
Working
Particulars | Amount | Remarks |
Estimated annual overhead cost | $4,300,000 | (a) |
Estimated machine hours | 200,000 | (b) |
Overhead rate | $21.50 | c=(a/b) |
Actual machine hours | 195,000 | (d) |
Overhead applied | $4,192,500 | e=(c*d) |
Actual annual overhead cost | $4,270,000 | (f) |
Under/(over) applied overhead | $77,500 | g=(f-e) |
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