Barnes Company applies overhead on the basis of machine hours. Given the following data, compute overhead applied and the under- or overapplication of overhead for the period:

Question

Quizplus · Accepted Answer

Overhead applied = Actual machine hours used x Predetermined overhead rate
Predetermined overhead rate = Estimated overhead cost / Estimated machine hours

Estimated overhead cost = $1,400,000
Estimated machine hours = 280,000
Predetermined overhead rate = $1,400,000 / 280,000 = $5 per machine hour

Actual machine hours used = 290,000
Overhead applied = 290,000 x $5 = $1,450,000
Actual overhead cost = $1,470,000

Under- or overapplication of overhead = Actual overhead cost - Overhead applied
= $1,470,000 - $1,450,000
= $20,000 underapplied

Barnes Company Applies Overhead on the Basis of Machine Hours