Question

Data
4	Allocation base	Machine-hours
5	Estimated manufacturing overhead cost	$448,000
6	Estimated total amount of the allocation base	70,000	machine-hours
7	Actual manufacturing overhead cost	$436,600
8	Actual total amount of the allocation base 77,000 Machine hours a) What is the predetermined overhead rate? (Round your answer to 2 decimal places.)        (b) By how much is the manufacturing overhead underapplied or overapplied? Either print or make a copy of your worksheet in your workbook before proceeding. You will need to refer back to this worksheet. Change the estimated total amount of the allocation base to 64,000 machine-hours, but keep everything the same as in Requirement 2. The data area of your worksheet should now look like this: Allocation base Machine-hours 5 Estimated manufacturing overhead cost $448,000 6 Estimated total amount of the allocation base 64,000 machine-hours 7 Actual manufacturing overhead cost $436,600 8 Actual total amount of the allocation base 77,000 machine hours

By how much is the manufacturing overhead underapplied or overapplied?

     

Change the estimated total amount of the allocation base back to 70,000 machine-hours, so that the data area of you worksheet looks exactly the same as in Requirement 2. Now change the actual manufacturing overhead cost from $436,600 to $428,300. The data area of your worksheet should now look like this:

Data
4	Allocation base	Machine-hours
5	Estimated manufacturing overhead cost	$448,000
6	Estimated total amount of the allocation base	70,000	machine-hours
7	Actual manufacturing overhead cost	$428,300
8	Actual total amount of the allocation base	77,000	machine-hours

By how much is the manufacturing overhead underapplied or overapplied?

Answer 1

a) Predetermined Overhead Rate = Estimated manufacturing overhead cost/Allocation Base

= $448,000/70,000 = $6.40 per hour

b) Applied Manufacturing Overhead = Actual base*Predetermined Overhead Rate

= 77,000 machine hours*$6.40 = $492,800

Underapplied/(Overapplied) Overhead = Actual Overhead - Applied Manufacturing Overhead

= $436,600 - $492,800 = ($56,200)

Thus the manufacturing overhead is overapplied by $56,200.

c) Predetermined OH Rate in this case = Estimated manufacturing overhead cost/Allocation Base

= $448,000/64,000 = $7.00 per hour

Applied Manufacturing Overhead = Actual base*Predetermined Overhead Rate

= 77,000 machine hours*$7.00 = $539,000

Underapplied/(Overapplied) Overhead = Actual Overhead - Applied Manufacturing Overhead

= $436,600 - $539,000 = ($102,400)

Thus the manufacturing overhead is overapplied by $102,400.

d) Underapplied/(Overapplied) Overhead = Actual Overhead - Applied Manufacturing Overhead

= $428,300 - $492,800 = ($64,500)

Thus the manufacturing overhead is overapplied by $64,500.