Ikerd Company applies manufacturing overhead to jobs on the

Ikerd Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total $326,772 for the year, and machine usage is estimated at 125,200 hours.

For the year, $363,320 of overhead costs are incurred and 132,000 hours are used.

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Account Titles and Explanation

Debit

Credit

Ikerd Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total $326,772 for the year, and machine usage is estimated at 125,200 hours. For the year, $363,320 of overhead costs are incurred and 132,000 hours are used.

Solution

1) Manufacturing overhead rate = $326,772 / 125,200 = $2.61 per machine hour

2) Manufacturing Overhead = $363,320 - (132,000 * $2.61) = $18,800 Underapplied

3)