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The following information relates to the XWS for the year 2019: Plant capacity 480,000 machine hours Normal level of production 432,000 machine hours Budgeted level of production 360,000 machine hours Budgeted manufacturing overhead is $2,160,000 Actual manufacturing overhead for the month of February, 2019 was $175,000 Actual machine hours used for February, 2019 were 35,000 If the overhead was applied on the basis of normal capacity, at the end of the month overhead would have been:
The following information relates to the XWS for the year 2019:
Plant capacity
480,000 machine hours
Normal level of production
432,000 machine hours
Budgeted level of production
360,000 machine hours
Budgeted manufacturing overhead is
$2,160,000
Actual manufacturing overhead for the month of February, 2019 was
$175,000
Actual machine hours used for February, 2019 were
35,000
If the overhead was applied on the basis of normal capacity, at the end of the month overhead would have been:
Expert Solution
If the overhead was applied on the basis of normal capacity, at the end of the month overhead would have been $17,500 under-applied.
Explanation
Pre-determined Budgeted Overhead Rate = Budgeted Manufacturing Overhead/Machine Hours as per Plant Capacity
= $2,160,000/480,000
= $4.5 per machine hour
Overhead Applied for the Month of February 2019 = 35,000 hours * $4.5 = $157,500
Actual Overhead = $175,000
Under applied overheads = Actual Overhead - Overhead Applied = $175,000 - $157,500 = $17,500
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