At the beginning of the year Monroe Company estimates annual overhead costs to be $2400000 and that 300000 machine hours will be incurred.Using machine hours as a base the amount of overhead applied during the year if actual machine hours for the year was 315000 hours is
A)$2400000.
B)$2285714.
C)$1680000.
D)$2520000.

Question

Quizplus · Accepted Answer

The predetermined overhead rate can be calculated as follows:

Predetermined overhead rate = Estimated annual overhead costs / Estimated machine hours
= $2400000 / 300000
= $8 per machine hour

Using this rate, the amount of overhead applied during the year can be calculated as:

Overhead applied = Predetermined overhead rate x Actual machine hours
= $8 x 315000
= $2520000

Therefore, the correct answer is D, $2520000.

At the Beginning of the Year Monroe Company Estimates Annual