Question

Hello I have a question with my Cost Accounting Class. I am not sure about the math of how to figure out the answers. If anyone could show me how to get the answers with the math that would be wonderful.

Thank you

Shell

Cool Company applies manufacturing overhead on the basis of machine-hours. On December 31, the company’s manufacturing overhead control T-account included the following amounts for the whole year.

Manufacturing Overhead Control
4,788,841	5,152,000

At the beginning of the year, management estimated overhead to be $5 million and the allocation base to be 312,500 machine-hours.

Required:
1.	Compute the predetermined overhead rate for the year. How many machine-hours were actually consumed during the year?

     

2.	What is the amount of actual overhead cost incurred for the year?

     

3.	At the end of the year, did the company overapply or underapply overhead, and by how much?

     

Answer 1

• Requirement 1

A	Estimated Overhead	$5,000,000
B	Estimated machine hours	312500
C = A / B	Predetermined Overhead rate	$16	per machine hour = Answer
D	Overhead applied	$5,152,000
E = C	Predetermined Overhead rate	$16
F = D/E	Actual machine hours consumed	322000	machine hours = Answer

• Requirement 2

Actual Overhead cost = Amount DEBITED to Manufacturing Overhead control
= $ 4,788,841

• Requirement 3
  >Overheads applied ($5152000) is MORE than actual overhead cost ($4788841)
  >This means that Overheads are OVER-APPLIED
  >Overhead OVER-APPLIEd = $ 5152000 – 4788841 = $ 363,159