Carter Corporation applies manufacturing overhead on the basis of machine-hours. At the beginning of the most recent year, the company based its predetermined overhead rate on total estimated overhead of $135,850. Actual manufacturing overhead for the year amounted to $145,000 and actual machine-hours were 5,660. The company's predetermined overhead rate for the year was $24.70 per machine-hour.
-The overhead for the year was:

Question

Quizplus · Accepted Answer

Overhead applied = $190,000
Actual overhead = $195,198
Overhead variance = Actual overhead - Overhead applied = $195,198 - $190,000 = $5,198
Since the actual overhead was higher than the overhead applied, there was an underapplication of overhead. Therefore, the best choice is D, which states that the overhead was $5,198 underapplied.

Carter Corporation Applies Manufacturing Overhead on the Basis of Machine-Hours