Question

Sutherland Company listed the following data for 2019: Budgeted factory overhead $2,223,000 Budgeted direct labor hours...

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):

Homework Answers

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

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