Question

Tom’s Tool & Die uses a predetermined factory overhead rate based on machine-hours. For August, Tom’s budgeted overhead was $148,000 based on a budgeted volume of 37,000 machine-hours. Actual overhead amounted to $154,000 with actual machine-hours totaling 37,500.

Required:

What was over- or underapplied manufacturing overhead in August?

Answer 1

Correct Answer:

Under Applied Overhead = $ 4000

Working:

A	Estimated Overhead	$        148,000
B	Estimated machine hours	37000
C=A/B	Predetermined overhead rate	$                 4.0
D	Actual Machine hours	37500
E=C*D	Applied Overhead	$        150,000
F	Actual Overhead	$        154,000
G=F-E	Under applied/(Over Applied) Overhead	$            4,000

End of answer.

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