Scottso Corporation applies overhead using a normal costing approach based upon machine-hours.Budgeted factory overhead was $232,750,budgeted machine-hours were 17,500.Actual factory overhead was $227,830,actual machine-hours were 16,150.How much is the over- or underapplied overhead?

Question

Quizplus · Accepted Answer

To calculate the over- or underapplied overhead, we need to use the formula:
Actual Factory Overhead - Applied Factory Overhead
Applied Factory Overhead = Budgeted Factory Overhead / Budgeted Machine Hours x Actual Machine Hours
Applied Factory Overhead = $232,750 / 17,500 x 16,150 = $214,174.29
Actual Factory Overhead - Applied Factory Overhead = $227,830 - $214,174.29 = $13,655.71
Since the result is positive, it means that the overhead was underapplied by $13,655.71. Therefore, the answer is B) $13,035 underapplied.

Scottso Corporation Applies Overhead Using a Normal Costing Approach Based