Managerial Accounting for Managers third edition Chapter 4 question 4-7E

Medusa Products uses a job-order costing system. Overhead costs are applied to jobs on the basis of machin hours. At the beginning of the year, management estimated that the company would work 85000 machine hours and incur $170000 in manufacturing overhead costs for the year.

1. compute the company's predeterminded overhead rate.

2. assume that during the year the company actually worked only 80000 machine hours and incurred $168000 of manufacturing overhead costs. compute the amount of underapplied or overapplied overhead for the year.

3. explain why the manufacturing overhead was underapplied or overapplied for the year.