Overhead for the year was A. $40,000 over-applied B. $56,000 under-applied C. $56,000 over-applied D. $40,000 under-applied E. some other amount
Hi,
I am wondering how to solve this and what the answer would be.
Thank you
Solution:-B) $56,000 under-applied is the correct answer.
Reason:-Predetermined overhead rate=(Budgeted manufacturing overheads) / (Budgeted manufacturing hours) x Actual
manufacturing hours
=( $480,000 / 20,000) x 16,000
=$24 x 16000
=$384,000
Under applied overheads=Budgeted or applied manufacturing overheads < Actual manufacturing overhead
=$384,000 < $440,000
Difference between two is=$56,000
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