Winston Company estimates that the factory overhead for the following year will be $1,250,000. The company has decided that the basis for applying factory overhead should be machine hours, which is estimated to be 50,000 hours. The total machine hours for the year were 54,300. The actual factory overhead for the year was $1,348,800. a. Determine the total factory overhead amount applied.
b. Calculate the over or underapplied amount for the year.

Solution :

a).

Estimated overhead                                1,250,000

Divide by the estimated machine hours    50,000        

Predetermined overhead rate                      25

Actual machine hours                                  54,300

Multiply by predetermined overhead rate        25

The factory overhead amount applied        $ 1,357,500

b).

Actual factory overhead                              1,348,800

Less : factory overhead amount applied     1,357,500

The underapplied amount is                       $ 8700

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