Overhead application: Working backward The Towson Manufacturing Corporation appl
ID: 2375401 • Letter: O
Question
Overhead application: Working backward
The Towson Manufacturing Corporation applies overhead on the basis of machine hours. The following divisional information is presented for your review:
Division A
Division B
Actual machine hours
22,500
?
Estimated machine hours
20,000
?
Overhead application rate
$4.50
$5.00
Actual overhead
$110,000
?
Estimated overhead
?
$90,000
Applied overhead
?
$86,000
Over- (under-) applied overhead
?
$6,500
Find the unknowns for each of the divisions?
Division A
Division B
Actual machine hours
22,500
?
Estimated machine hours
20,000
?
Overhead application rate
$4.50
$5.00
Actual overhead
$110,000
?
Estimated overhead
?
$90,000
Applied overhead
?
$86,000
Over- (under-) applied overhead
?
$6,500
Explanation / Answer
For A For B
Actual machine hours
22,500
= 79500/5 = 15900
Estimated machine hours
20,000
=90000/5 = 18000
Overhead application rate
$4.50
$5.00
Actual overhead
$110,000
=86000-6500 = 79500
Estimated overhead
= 20000*4.5 = 90000
$90,000
Applied overhead
Need More data
$86,000
Over- (under-) applied overhead Need More data $6,500
ACTUAL Overhead is found after the manufacturing process is complete which gives the actual amount of used/consumed resources (or total costs) that it needed to complete the job.
Actual machine hours
22,500
= 79500/5 = 15900
Estimated machine hours
20,000
=90000/5 = 18000
Overhead application rate
$4.50
$5.00
Actual overhead
$110,000
=86000-6500 = 79500
Estimated overhead
= 20000*4.5 = 90000
$90,000
Applied overhead
Need More data
$86,000
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