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Bramble Corp. 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:

Estimated annual overhead cost $4100000
Actual annual overhead cost $4070000
Estimated machine hours 500000
Actual machine hours 495000

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ayokenny2001

Answer:

$11,000 under applied

Explanation:

To compute the under or over applied overhead, we need to find out the predetermined overhead rate

Predetermined overhead rate = Total estimated manufacturing overhead ÷ Estimated machine hours

= $4,100,000 ÷ 500,000

= $8.2

Then, the overhead applied is;

= Actual machine hours × Predetermined overhead rate

= 495,000 × $8.2

= $4,059,000

Now, the under applied or over applied overhead is

= Actual annual overhead cost - Applied overhead

= $4,070,000 - $4,059,000

= $11,000 under applied

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