Kimble Company applies overhead on the basis of machine hours. Given the following data, compute overhead applied and the under- or overapplication of overhead for the period: Estimated annual overhead cost - $1,600,000 Actual annual overhead cost - $1,575,000 Estimated machine hours - 400,000 Actual machine hours - 390,000

Compute overhead applied and the under- or overapplication of overhead for the period

Budgeted Rate = $1,600,000/ 400,000 machine hours

                         = $ 4 per Machine Hour

Overheads Applied = 390,000 × $ 4 per Machine Hour

                                       = 1,560,000

Actual Overheads            = 1,575,000

Less Applied Overheads = 1560,000

Under- Applied                =     15,000

Explanation:

Overheads are Applied as follows:

Actual Activity for the period × Budgeted Overhead Rate

Budgeted Rate is determined as follows:

Budgeted Total Overheads/Budgeted Activity

Under- or Overapplication of overhead is determined as follows:

Actual Overheads - Applied Overheads

Under Application is therefore : Actual Overheads > Applied Overheads

Over Application is therefore : Actual Overheads < Applied Overheads

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