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    Explan over and underapplied overhead based on machine hours

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    Question 1

    Manufacturing overhead ---over/underapplied. Fortune inc produces automobile bumpers. Overhead is applied on the basis of machine hours required for cutting and fabricating. A predetermined overhead application rate of $12.70 per machine hour was established for 2006.

    A) If 9000 machine hours were expected to be used during 2006,how much overhead was expected to be incurred.?

    B) Actual overhead incurred during 2006 totaled $121,650 and 9100 machine hours were used during 2006 calculate the amount of over-or underapplied overhead for 2006.

    C) Explain the accounting necessary for the over or underapplied overhead for the year.

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    Solution Preview

    Requirement A
    Expected overhead = 9,000*$12.70 = $114,300

    Requirement B
    9,100*$12.70 - $121,650 = $6,080 underapplied overhead

    Requirement C
    The over or underapplied overhead allows management to review its existing processes as ...

    Solution Summary

    The expert explains over and under applied overhead based on machine hours.