Duggan Company applies manufacturing overhead to jobs on the basis of machine ho

Question

Duggan Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total $342,360 for the year, and machine usage is estimated at 126,800 hours.

For the year, $360,097 of overhead costs are incurred and 131,800 hours are used. 2.7 machine hours are calculated... what is

What is the amount of under- or overapplied overhead at December 31?

Manufacturing Overhead $ UnderappliedOverapplied Duggan Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total $342,360 for the year, and machine usage is estimated at 126,800 hours. For the year, $360,097 of overhead costs are incurred and 131,800 hours are used. 2.7 machine hours are calculated... what is What is the amount of under- or overapplied overhead at December 31?

Explanation / Answer

Hi,

Please find the answer as follows:

Predetermined Overhead Rate = Estimated Manufacturing Overhead/Estimated Machine Hours = 342360/126800 = 2.7 per machine hour

Actual Overhead = 360097

Applied Overhead = Actual Machine Hours*Predetermined Overhead Rate = 131800*2.7 = 355860

Underapplied Overhead = 360097 - 355860 = 4237

Answer is 4237 (Underapplied).

Thanks.

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