Question

# Logan Products computes its predetermined overhead rate annually on the basis of machine-hours. At the beginning...

Logan Products computes its predetermined overhead rate annually on the basis of machine-hours. At the beginning of the year, it estimated that its total manufacturing overhead would be \$368,500 and machines would be run a total of 42,000 hours. Its actual total manufacturing overhead for the year was \$356,400 and its actual total machine-hours was 41,500 hours. Required: Compute the company’s predetermined overhead rate for the year, calculate the total overhead applied, and determine the amount of under- or overapplied overhead in the year. (Round your predetermined overhead rate to 2 decimal places.)

Estimated machine hour = 42,000

= 368,500/42,000

= \$8.77 per machine hour

Actual machine hours = 41,500

= 41,500 x 8.77

= \$363,955

= 363,955 - 356,400

= \$7,555

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