Winston Company estimates that the factory overhead for the following year will be $1,250,000. The company has decided that the basis for applying factory overhead should be machine hours, which is estimated to be 50,000 hours. The total machine hours for the year were 54,300. The actual factory overhead costs for the year were $1,375,000. Determine the over- or underapplied amount for the year.
A) $17,500 overapplied
B) $17,500 underapplied
C) $118,250 overapplied
D) $118,250 underapplied

Question

Quizplus · Accepted Answer

The predetermined overhead rate is $1,250,000 / 50,000 hours = $25 per machine hour. Applied overhead is 54,300 hours * $25 = $1,357,500. The actual overhead is $1,375,000. The underapplied overhead is $1,375,000 - $1,357,500 = $17,500.

Winston Company Estimates That the Factory Overhead for the Following