Scottso Corporation applies overhead using a normal costing approach based upon machine-hours.Budgeted factory overhead was $266,400,budgeted machine-hours were 18,500.Actual factory overhead was $287,920,actual machine-hours were 19,050.How much is the Over- or underapplied overhead?

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Quizplus · Accepted Answer

To determine the overhead applied, we can use the budgeted overhead rate, which is calculated as budgeted factory overhead divided by budgeted machine-hours: $266,400 ÷ 18,500 = $14.40 per machine-hour. Using this rate, the applied overhead is calculated as actual machine-hours multiplied by the overhead rate: 19,050 x $14.40 = $274,320. Thus, the difference between actual overhead and applied overhead is: $287,920 - $274,320 = $13,600 underapplied. Therefore, the best choice is B.

Scottso Corporation Applies Overhead Using a Normal Costing Approach Based