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Accounting

Problem:

Mosso Company applies manufacturing overhead to production using a predetermined overhead based on machine hours each quarter. Because demand for the company's product has been soft, planned production level for the most recent quarter was significantly below the company's capacity. Since manufacturing overhead for company is entirely fixed, the controller is concerned that this has distorted applied overhead and cost per unit. Below are data for the quarter :

Machine Hours Estimated At Beginning Of Quarter: 81,000
Machine Hours Capacity: 85,000
Actual Machine Hours At End of Quarter: 80,400
Total Manufacturing Overhead Estimated at Beginning Of Quarter: 688,500
Total Manufacturing Overhead at Capacity: 688,500
Actual Total Manufacturing Overhead at End of Quarter: 685,008

Requirement:

Question: If the company bases its predetermined overhead rate on capacity, by how much was manufacturing overhead underapplied or overapplied?

A) Underapplied by $1,608

B) Underapplied By $33,768

C) Overapplied by $3,492

D) Overapplied by $1,608

E) Overapplied by $33,768

F) Underapplied by $3,492

Note: Please show how to work it out.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91164428

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