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Applied vs. Actual Manufacturing Overhead Kubal Inc. applies overhead based on machine hours. Kubal reports the...

Applied vs. Actual Manufacturing Overhead

Kubal Inc. applies overhead based on machine hours. Kubal reports the following for the year just ended:

Budgeted overhead for the year $290,000
Budgeted machine hours 2,000
Actual overhead for the year $315,000
Actual machine hours 2,400

What is the amount of over- or under-applied overhead for the year?

$AnswerAnswerover-appliedunder-applied

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Answer #1
Predetermined overhead rate = Budgeted overheads / Budgeted machine hours
=> Predetermined overhead rate = $290,000 / 2,000 hours = $145 per machine hour
Total overheads applied during the year = Actual machine hours x Predetermined overhead rate
=> Total overheads applied during the year = 2,400 hours x $145 per hour = $348,000
Actual overheads for the year = $315,000
Hence, the overapplied overheads = Total overheads applied during the year - Actual overheads
= $348,000 - $315,000 = $33,000 overapplied
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