Question

Tom’s Tool & Die uses a predetermined factory overhead rate based on machine-hours. For August, Tom’s budgeted overhead was $247,500 based on a budgeted volume of 45,000 machine-hours. Actual overhead amounted to $225,000 with actual machine-hours totaling 41,500.

Required:

What was over- or underapplied manufacturing overhead in August? (Do not round intermediate calculations.)

Answer 1

Ans.	*Calculations for Predetermined overhead rate :
	Predetermined overhead rate   =   Budgeted overhead cost / Budgeted machine hours
	$247,500 / 45,000
	$5.50 per machine hour
	*Calculations for Manufacturing overhead applied :
	Manufacturing overhead assigned = Actual machine hours * Predetermined overhead rate
	41,500 * $5.50
	$228,250
	*Calculations for Over or Under applied overhead :
	Over applied overhead = Applied overhead - Actual overhead
	$228,250 - $225,000
	$3,250
	If the applied overhead is greater than the Actual overhead
	it means that the overhead is over applied.