US CMA Part 1 · Chapter 4 · Question 12 of 22
A job-order shop applies overhead using a predetermined rate based on budgeted overhead of $1,440,000 and 48,000 budgeted machine hours. Actual machine hours were 50,500 and actual overhead was $1,492,000. What is the over- or under-applied overhead?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) $23,000 overapplied
Explanation
Predetermined rate = $1,440,000 / 48,000 = $30 per machine hour. Applied overhead = 50,500 x $30 = $1,515,000. Applied exceeds actual ($1,492,000) by $23,000, so overhead is overapplied.
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