Scottso Corporation applies overhead using a normal costing approach based upon machine-hours.Budgeted factory overhead was $266,400,budgeted machine-hours were 18,500.Actual factory overhead was $287,920,actual machine-hours were 19,050.How much is the over- or underapplied overhead?

Question

Quizplus · Accepted Answer

First, we need to calculate the predetermined overhead rate:
Predetermined overhead rate = Budgeted factory overhead / Budgeted machine-hours
Predetermined overhead rate = $266,400 / 18,500 = $14.40 per machine-hour

Next, we can calculate the amount of overhead that should have been applied:
Overhead applied = Predetermined overhead rate * Actual machine-hours
Overhead applied = $14.40 per machine-hour * 19,050 machine-hours = $274,320

Finally, we can calculate the over- or underapplied overhead:
Overapplied overhead = Overhead applied - Actual factory overhead
Overapplied overhead = $274,320 - $287,920 = $-13,600
Therefore, the answer is B) $13,600 underapplied.

Scottso Corporation Applies Overhead Using a Normal Costing Approach Based