PEL Industries has been using an overhead rate of $4.75 per machine hour. During the year, the company incurred $320,000 in actual overheads, and 67,000 machine hours were worked. Were the overheads over-applied or under-applied, and by how much?

PEL Industries has been using an overhead rate of $4.75 per machine hour. During the year, the company incurred $320,000 in actual overheads, and 67,000 machine hours were worked. Were the overheads over-applied or under-applied, and by how much?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter6: Activity-based, Variable, And Absorption Costing

Section: Chapter Questions

Problem 3EA: A company estimated 100,000 direct labor hours and $800,000 in overhead. The actual overhead was...

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Question

Were the overheads over applied or under applied and by how much for this general accounting question?

PEL Industries has been using an overhead rate of
$4.75 per machine hour. During the year, the
company incurred $320,000 in actual overheads,
and 67,000 machine hours were worked.
Were the overheads over-applied or under-applied,
and by how much?

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