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 $15,000,000 with 300,000 total machine hours. Year to date, the actual overhead is $16,000,000 and the actual machine hours are 330,000 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

$1,000,000 over applied

$1,000,000 under applied

$500,000 over applied

$500,000 under applied

$1,000,000 over applied

$1,000,000 under applied

$500,000 over applied

$500,000 under applied

Explanation / Answer

Answer=$500,000 over applied

Predetermined overhead rate based on machine hours=15,000,000/300,000= $50 per machine hour

Overhead based on actual machine hours of 330,000 hours= 330000*50=$16500000

Actual Overhead =$16,000,000

Over applied overhead=$16500000-$16,000,000=$500000

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