Cayman Custom Manufacturing Company applies manufacturing overhead on the basis of machine hours. At the beginning of the year, the company estimated its total overhead cost to be $300,000 and machine hours to be 15,000. Actual manufacturing overhead and machine hours were $340,000 and 16,000, respectively.

Cayman Custom Manufacturing Company applies manufacturing overhead on the basis of machine hours. At the beginning of the year, the company estimated its total overhead cost to be $300,000 and machine hours to be 15,000. Actual manufacturing overhead and machine hours were $340,000 and 16,000, respectively.

Requirement 1:

Compute the predetermined overhead rate. (Omit the "$" sign in your response.)

Predetermined overhead rate

$ 20

per machine hour

Requirement 2:

Compute applied manufacturing overhead. (Omit the "$" sign in your response.)

Applied manufacturing overhead

$ 320,000

Requirement 3:

Compute over- or underapplied manufacturing overhead. (Input the amount as positive value. Omit the "$" sign in your response.)

Overhead

underapplied

$ 20,000

Explanation:

1:

Predetermined overhead rate = $300,000 / 15,000 = $20 per machine hour

2:

Applied manufacturing overhead = Predetermined overhead rate × Actual value of allocation base

Applied manufacturing overhead = $20 × 16,000 actual machine hours = $320,000

3:

Manufacturing Overhead

Actual	340,000		Applied	320,000
Balance (Underapplied)	20,000