(Appendix 3A) Secrease Corporation uses machine-hours as the allocation base for applying its manufacturing overhead.
$\begin{array}{lr}
\text { Estimated manufacturing overhead cost for the year } & \$ 594,000 \
\text { Capacity } & 110,000 \text { machine-hours } \
\text { Estimated amount of the allocation base for the year } & 108,000 \text { machine-hours } \
\text { Amount of the allocation base for the actual output } & \
\text { of the year } & \$ 8,000 \text { machine-hours } \
\text { Actual manufacturing overhead cost for the year } & \$ 589,000
\end{array}$
All of the company's manufacturing overhead is fixed.
-(Appendix 3A)If the predetermined overhead rate is based on capacity,by how much was manufacturing overhead for the year over applied or under applied?
A) Manufacturing overhead under applied $113,800
B) Manufacturing overhead over applied $113,800
C) Manufacturing overhead over applied $105,000
D) Manufacturing overhead under applied $105,000

Question

Quizplus · Accepted Answer

The predetermined overhead rate based on capacity is $594,000 / 110,000 machine-hours = $5.40 per machine-hour. Applied overhead = $5.40 * 8,000 = $43,200. Actual overhead is $589,000. Under applied overhead = $589,000 - $43,200 = $545,800. The closest option is A, which indicates under applied $113,800, suggesting a calculation error in the options.

(Appendix 3A) Secrease Corporation Uses Machine-Hours as the Allocation Base