The Thomlin Company forecasts that total overhead for the current year will be $

Question

The Thomlin Company forecasts that total overhead for the current year will be $11,946,000 with 188,000 total machine hours. Year to date, the actual overhead is $7,970,000 and the actual machine hours are 84,000 hours. If the Thomlin Company uses a predetermined overhead rate based on machine hours for applying overhead, as of this point in time (year to date), the overhead is Round the factory overhead rate to the nearest dollar before multiplying by the number of hours. $2,594,000 overapplied $3,631,600 underapplied $2,594,00D underapplied $3,631,600 overapplied

Explanation / Answer

Predetermined overhead rate=Estimated total overhead/Estimated machine hours

=(11,946,000/188000)=$64 per machine hour(Approx)

Hence applied overhead=Predetermined overhead rate*Actual machine hours

=(64*84000)=$5376000

Hence since applied overhead is less than the actual overhead;

overhead underapplied=(7970000-5376000)=$2,594,000.

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