Great Eagle Company allocates overhead based on machine hours. They estimated overhead costs for the year to be $380,000. Estimated machine hours was 5,000 and direct labor hours was 2,000. Estimated direct labour cost was $250,000 and direct material cost was $140,000. Actual hours and overhead costs for the year were 4,300 machine hours and $310,000 of overhead.
a. Overhead application rate for the year = estimated overhead costs / Estimated machine hours
= $380000/5000 = $76 per hour
b.Applied overhead for the year = Overhead application rate x Actual machine hours
= $76 per hour x 4,300 hours
c. Estimated total cost of production = Estimated direct labour cost + direct material cost +estimated overhead costs
= $250,000 + $140,000 + $380000
d. Over (under) applied overhead = Applied overhead- Actual overhead
= $326800 - $310,000
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