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A company expected its annual overhead costs to be $750,000 and machine hours to equal 100,000 hours. Actual overhead was $745,000, and actual machine hours totalled 97,000 hours.

-How much overhead was over or under applied?

Question

Use the following information to answer questions

A company expected its annual overhead costs to be $750,000 and machine hours to equal 100,000 hours. Actual overhead was $745,000, and actual machine hours totalled 97,000 hours.

-How much overhead was over or under applied?

Quizplus · Accepted Answer

The predetermined overhead rate is $750,000 / 100,000 hours = $7.50 per hour. Applied overhead is 97,000 hours * $7.50 = $727,500. Actual overhead is $745,000. Therefore, overhead is $745,000 - $727,500 = $17,500 under-applied.

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