Question

The Thomlin Company forecasts that total overhead for the current year will be $11,003,000 with 150,000 total machine hours. Year to date, the actual overhead is $7,958,000 and the actual machine hours are 91,000 hours. If the Thomlin Company uses a predetermined overhead rate based on machine hours for applying overhead, as of this point in time (year to date), the overhead is

Round the factory overhead rate to the nearest dollar before multiplying by the number of hours.

a.$1,972,500 underapplied

b.$1,972,500 overapplied

c.$1,315,000 overapplied

d.$1,315,000 underapplied

Answer 1

answer:

predetermined overhead rate = estimated total overheads / estimated total machine hours = $11,003,000 / 150,000 = $73 ( rate rounded off to the nearest dollar )

overheads applied = predetermined overhead rate * actual machine hours = $73 * 91,000 = $6,643,000

actual overheads incurred = $7,958,000

As here we can see that the overheads applied are less than actual overheads incurred, means the overheads are underapplied

underapplied overheads = actual overheads incurred - overheads applied = $7,958,000 - $6,643,000 = $1,315,000 [ option d ]