Huxtable charges manufacturing overhead to products by using a predetermined application rate, computed on the basis of machine hours. The following data pertain to the current year:
Budgeted manufacturing overhead: $480,000
Actual manufacturing overhead: $440,000
Budgeted machine hours: 20,000
Actual machine hours: 16,000
Overhead applied to production totaled:
A) $352,000.
B) $384,000.
C) $550,000.
D) $600,000.
E) some other amount.

Question

Quizplus · Accepted Answer

To calculate the predetermined application rate, we divide the budgeted manufacturing overhead by the budgeted machine hours:

Predetermined application rate = $480,000 ÷ 20,000 machine hours = $24 per machine hour

Then, we can use the predetermined application rate to apply overhead to production:

Overhead applied = Actual machine hours × Predetermined application rate 
Overhead applied = 16,000 machine hours × $24 per machine hour = $384,000

Therefore, the answer is B).

Huxtable Charges Manufacturing Overhead to Products by Using a Predetermined