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    Predetermined overhead rate: Over-applied or under-applied

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    Indigo Inc. assigns overhead to specific jobs based on machine hours. At the beginning of the current year, estimated overhead costs were $2,150,000 & estimated machine hours were 500,000. By the end of the year, actual overhead costs were calculated to be $1,900,000 & actual machine hours were 475,000.

    Use MS EXCEL to:

    1) Calculate the predetermined overhead rate.
    2) How much overhead would be applied to particular job that required 315 machine hours?
    3) How much total overhead was applied during the year?
    4) Was over- or under-applied? By how much was overhead over- or under-applied for the year?

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    Solution Summary

    The expert examines predetermined overhead rate for over-applied or under-applied.