Developing and Using a Predetermined Overhead Rate Assume that the following pre

Question

Developing and Using a Predetermined Overhead Rate Assume that the following predictions were made for 2009 for one of the plants of Milliken & Company: Total manufacturing overhead for the year $42,000,000 Total machine hours for the year 2,000,000 Actual results for February 2009 were as follows: Manufacturing overhead $5,470,000 Machine hours 310,000 As of February 1, actual overhead was underapplied by $500,000. Determine the cumulative amount of any overapplied or underapplied overhead at the end of February.

Explanation / Answer

Statement showing computations Particulars Amount Estimated Mabufacturing Overhead 42,000,000.00 Estimated machine Hours      2,000,000.00 Overhead rate =42m/2m                    21.00 Actual Machine Hours         310,000.00 Applied Overhead =310,000 * 21      6,510,000.00 Actual Manufacturing overhead      5,470,000.00 Overapplied overhead = 6510,000 - 5470,000      1,040,000.00 Opening under applied overhead         500,000.00 Closing overapplied overhead = 1040,000 -500,000         540,000.00

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