Question

Sutherland Company listed the following data for 2019:

	Budgeted factory overhead	$2,223,000
	Budgeted direct labor hours	90,000
	Budgeted machine hours	50,000
	Actual factory overhead	2,201,800
	Actual direct labor hours	84,500
	Actual machine hours	45,400

If overhead is applied based on machine hours, the overapplied/underapplied overhead is (round calculations to 2 significant digits):

Answer 1

Given,

Budgeted Overhead = $2,223,000

Budgeted Machine Hours = 50,000

Predetermined overhead rate per machine hour = $2,223,000 / 50,000

predetermined overhead rate per machine hour = $44.46 per machine hour

Actual Machine hours = 45,400

Hence Overhead applied = 45,400 machine hours * $44.46 per machine hour

Overhead applied = $2,018,484

Actual Overhead = $2,201,800

Since, actual overhead > Overhead applied, we can say that Overhead is Under applied.

Under applied overhead = $2,201,800 - $2,018,484 = $183,316

Under applied overhead = $183,316