The New Generation Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total $950,000 for the year, and machine usage is estimated at 130,000 hours.

In the first six months of the calendar year, $400,000 of overhead costs was incurred and 60,000 machine hours were used. For the remainder of the year, $500,000 of additional overhead costs is incurred. Actual machine hours exceeded expected machine hours by 10% of the original estimate.

Instructions

a) Calculate the predetermined manufacturing overhead rate that was used during the year. If a job used 1,000 machine hours and 500 direct labour hours, what would the applied overhead be for this job?

b) How much is the amount of over- or under-applied overhead at the end of the first 6 months?

c) How much is the amount of over- or under-applied overhead at December 31 if over- or under-applied overhead has not been accounted for since June 30?