Vektek, Inc. thinks machine hours is the best activity base for its manufacturing overhead. The estimate of annual overhead costs for its jobs was $2,050,000. The company used 1,000 hours of processing on Job No. B12 during the period and incurred overhead costs totaling $2,100,000. The budgeted machine hours for the year totaled 20,000. How much overhead should be applied to Job No. B12? a. $41,000

b. $820

c. $42,000

d. $840

a. $41,000

Explanation:

According to given data

Overheads are applied using predetermined overhead rate, which is calculated using budgeted overhead and budgeted activity on which overheads are applied.

Predetmined Overhead rate = Budgeted Overhead / Budgeted Machine hours = $2,050,000 / 20,000 = $102.5 per machine hour

Overheads Applied = Predetermined Overhead Rate x Actual Machine Hours = $102.5 x 1,000 = $102,500

Given options are inconsistent with the data givenin the question

The Original Question is,

Vektek, Inc. thinks machine hours is the best activity base for its manufacturing overhead. The estimate of annual overhead costs for its jobs was $820,000. The company used 1,000 hours of processing on Job No. B12 during the period and incurred overhead costs totaling $840,000. The budgeted machine hours for the year totaled 20,000. How much overhead should be applied to Job No. B12?

$41,000

$820

$42,000

$840

According to Orginal Question

Overheads are applied using predetermined overhead rate, which is calculated using budgeted overhead and budgeted activity on which overheads are applied.

Predetmined Overhead rate = Budgeted Overhead / Budgeted Machine hours = $820,000 / 20,000 = $41 per machine hour

Overheads Applied = Predetermined Overhead Rate x Actual Machine Hours = $41 x 1,000 = $41,000

No option is correct, the correct answer is estimated overhead = $102,500

Explanation:

total estimates overhead expense = $2,050,000

overhead is assigned based on machine hours = 20,000 per year

overhead rate = $2,050,000 / 20,000 = $102.50 per machine hour

actual overhead rate applied to job B12 = overhead rate x machine hours = $102.50 x 1,000 = 102,500

since the actual overhead expense was $2,100,000 the overhead rate was underapplied, because it was actually higher than expected. This resulted in a $2,500 unfavorable variance in applied overhead for job B12 = estimated overhead - real overhead = $102,500 - $105,000 = - $2,500