Manufacturing overhead—over/underapplied Checker, Inc., producesautomobile 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 2013.Required:a. If 12,000 machine hours were expected to be used during 2013, how much overhead was expected to be incurred?b. Actual overhead incurred during 2013 totaled $229,400, and 12,200 machine hours were used during 2013. Calculate the amount of over- or underapplied overhead for 2013.c. Explain the accounting necessary for the over- or underapplied overhead for the year.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Manufacturing
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 2013.
Required:
a. If 12,000 machine hours were expected to be used during 2013, how much overhead was expected to be incurred?
b. Actual overhead incurred during 2013 totaled $229,400, and 12,200 machine hours were used during 2013. Calculate the amount of over- or underapplied overhead for 2013.
c. Explain the accounting necessary for the over- or underapplied overhead for the year.
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