Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 65

Manufacturing overhead — over/underapplied Checker, Inc., produces automobile bumpers. Overhead is applied on the basis of machine hours required for cutting and fabricating. A predetermined overhead application rate of $18.50 per machine hour was established for 2010.

Required:

a.If 12,000 machine hours were expected to be used during 2010, how much overhead was expected to be incurred?

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b. Actual overhead incurred during 2010 totaled $229,400, and 12,200 machine hours were used during 2010. Calculate the amount of over- or underapplied overhead for 2010.

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c. Explain the accounting necessary for the over- or underapplied overhead for the year.

Step 1 of 4

Estimating manufacturing overhead as over- or under-applied

By extracting the information: