Scottso Corporation applies overhead using a normal costing

Scottso Corporation applies overhead using a normal costing approach based upon machine-hours. Budgeted factory overhead was $283,100, budgeted machine-hours were 19,000. Actual factory overhead was $313,600, actual machine-hours were 19,600. How much is the Over- or underapplied overhead?

Solution

Budgeted factory overhead was =$2,83,000

Machine hours                         =19,000

per hour budgeted factory overhead was=(2,83,000/19,000)=$14.9 per hour

Actual factory overhead was=$3,13,600

Applied over head was =19,600*14.9

                                 =2,92,040

over head or under applied overhead=$3,13,600-$2,92,040

                                         =$21,560