Bramble Corp. applies overhead on the basis of machine hours.
Given the following data, compute overhead applied and the under- or over-application of overhead for the period:

Estimated annual overhead cost $2800000
Actual annual overhead cost $2770000
Estimated machine hours 200000
Actual machine hours 195000

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andromache andromache · Answer 1 · 2020-03-12T11:27:26+01:00

Answer:

$2,730,000 and $40,000 under applied

Explanation:

For computing the under applied or over applied, first we have to find out the predetermined overhead rate which is shown below:

Predetermined overhead rate = (Total estimated manufacturing overhead) ÷ (estimated machine hours)

= ($2,800,000) ÷ (200,000 machine hours)

= $14

Now the overhead applied is

= Actual machine hours × predetermined overhead rate

= 195,000 × $14

= $2,730,000

Now the over applied or under applied is

= Actual annual overhead cost - applied overhead

= $2,770,000 - $2,730,000

= $40,000 under applied