Question

Estimated variable manufacturing overhead $25 per machine hour Estimated fixed manufacturing overhead $67,100 Estimated machine-hours 6,100 Actual manufacturing overhead $231,500 Actual machine-hours 6,250 The estimates of the manufacturing overhead and of machine-hours were made at the beginning of the year for the purpose of computing the company's predetermined overhead rate for the year. The applied manufacturing overhead for the year is:

Answer 1

Applied manufacturing overhead for the year                   [Refer working notes below]

$6,500

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Working note - Computation of Overhead rate
Variable manufacturing overhead rate	$25
Fixed manufacturing overhead rate        [Estimated fixed manufacturing overhead / Estimated machine hours = $67,100 / 6,100]	$11
Overhead rate                                         [$25 + $11]	$36

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Working note 2 - Calculation of Under-applied (or) Over-applied overhead
Actual manufacturing overhead	$231,500
Manufacturing overhead applied     [Overhead rate x Actual machine hours = $36 x 6,250]	$225,000

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Since the Manufacturing overhead applied ($225,000) is less than the actual manufacturing overhead ($231,500), overhead is considered under-applied.

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Under-applied overhead            [Actual manufacturing overhead - Manufacturing overhead applied = $231,500 - $225,000]

$6,500