Erca, Inc. produces automobile bumpers. Overhead is applied on the basis of machine hours required

for cutting and fabricating. A predetermined overhead application rate of $15.00 per machine hour was

established for 2010.

(a.) If 9,000 machine hours were expected to be used during 2010, how much overhead was expected to be

incurred?

(b.) Actual overhead incurred during 2010 totaled $135,000, and 9,200 machine hours were used during

2010. Calculate the amount of over-or underapplied overhead for 2010.

(c.) Explain the accounting necessary for the over- or underapplied overhead for the year.