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 $1,040,000 of total manufacturing overhead for an estimated activity level of 80,000 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 71,eee 990,e8e Required: 1. Compute the underapplied or overappled overhead, Complete this question by entering your answers in the tabs below. Req 1 Compute the underapplied or overapplied overhead. CIRent

Answer 1

Calculation of pre determined overhead rate: Particulars	Amount
Total estimated manufacturing overheads	$ 1040000
Total estimated machine hours	80000
Pre determined overhead rate (1040000/80000)	$13

Calculation of underapplied or overapplied overheads:

Particulars	Amount
Predetermined overhead rate	$13
Actual machine hours	71000
Applied overhead (13*71000)	$923000
Actual overheads	$990000
Under applied overhead s (990000-923000)	$67000