Kimble 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: Estimated annual overhead cost - $1,600,000 Actual annual overhead cost - $1,575,000 Estimated machine hours - 400,000 Actual machine hours - 390,000

Question

Jadiel Parsons

Business

9 April, 12:50

Kimble 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: Estimated annual overhead cost - $1,600,000 Actual annual overhead cost - $1,575,000 Estimated machine hours - 400,000 Actual machine hours - 390,000

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Jessica Juarez · Answer 1

Compute overhead applied and the under - or overapplication of overhead for the period

Budgeted Rate = $1,600,000 / 400,000 machine hours

= $ 4 per Machine Hour

Overheads Applied = 390,000 * $ 4 per Machine Hour

= 1,560,000

Actual Overheads = 1,575,000

Less Applied Overheads = 1560,000

Under - Applied = 15,000

Explanation:

Overheads are Applied as follows:

Actual Activity for the period * Budgeted Overhead Rate

Budgeted Rate is determined as follows:

Budgeted Total Overheads/Budgeted Activity

Under - or Overapplication of overhead is determined as follows:

Actual Overheads - Applied Overheads

Under Application is therefore : Actual Overheads > Applied Overheads

Over Application is therefore : Actual Overheads < Applied Overheads