Pioria Products assigns overhead to specific jobs based on machine hours. At the beginning of the current year, estimated overhead costs were $2,150,000 and estimated machine hours were 500,000. By the end of the year, actual overhead costs were
calculated to be $2,000,000 and actual machine hours were 475,000. Required: A. Calculate the predetermined overhead rate. B. How much overhead would be applied to a particular job that required 315 machine hours? C. How much total overhead was applied during the year? D. By how much was overhead over- or underapplied for the year? Be sure to indicate whether it was over- or underapplied.
A. Predetermined rate = $2,150,000 ΒΈ 500,000 = $4.30 per direct labor hour
B. $1,354.50 ($4.30 x 315 direct labor hours)
C. Total applied overhead was $2,042,500 (475,000 x $4.30)
D. $42,500 overapplied. The difference between actual and applied was $42,500 ($2,042,500 vs. $2,000,000). Overhead was overapplied.
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