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Edwards Company applies manufacturing overhead to jobs based on machine hours used. Overhead costs are expected to total $1,800,000 for the year, with an estimated machine usage of 200,000 hours.

In January:
- Overhead costs incurred: $186,000
- Machine hours used: 22,000 hours

For the remainder of the year:
- Additional overhead costs incurred: $1,940,000
- Additional machine hours worked: 214,000 hours

Tasks:

1. Compute the manufacturing overhead rate for the year.
- Manufacturing overhead rate: _____ per machine hour

2. Determine the amount of over- or underapplied overhead at January 31.
- Over- or underapplied overhead: $_____

3. Determine the amount of over- or underapplied overhead at December 31.
- Over- or underapplied overhead: $_____

Answer :

Final answer:

The manufacturing overhead rate for Edwards Company is $9 per machine hour. At January 31, there is an underapplied overhead of $12,000. At December 31, the total overhead costs and actual machine hours used throughout the year must be compared to the applied overhead to determine the over- or underapplied amount for the year.

Explanation:

The manufacturing overhead rate is calculated by dividing the total expected overhead costs by the estimated machine usage. For Edwards Company, the calculation is $1,800,000 / 200,000 hours, which equals $9 per machine hour.

To determine the amount of over- or underapplied overhead at January 31, you compare the actual costs incurred to the applied overhead based on machine hours used. With $186,000 actual cost and 22,000 machine hours used, the applied overhead is 22,000 hours × $9/hour = $198,000. Thus, there is an underapplied overhead of $198,000 - $186,000 = $12,000 at the end of January.

At December 31, after incurring additional costs and machine hours, the total overhead will be recomputed with the actual figures. The actual overhead is $186,000 + $1,940,000, and the actual machine hours are 22,000 + 214,000. The applied overhead is 236,000 hours × $9/hour. The difference between the total actual overhead and the total applied overhead gives us the amount of over- or underapplied overhead for the year.

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Rewritten by : Barada

Answer:

Predetermined overhead rate = $9

January = $12,000 over applied

December - $2,000 under applied

Explanation:

For computing the ended overhead amount, first, we have to compute the predetermined overhead rate. The formula is shown below:

Predetermined overhead rate = (Total estimated manufacturing overhead) ÷ (estimated machine labor-hours)

= $1,800,000 ÷ 200,000 hours

= $9

Now we have to find the actual overhead for the January month which equal to

= Actual machine labor-hours × predetermined overhead rate

= 22,00 hours × $9

= $198,000

So, the ending overhead equals to

= Actual manufacturing overhead - actual overhead

= $186,000 - $198,000

= $12,000 over applied

And, the actual manufacturing overhead for the December month which equal to

= $186,000 + $1,940,000

= $2,126,000

Actual overhead = (22,000 + 214,000) × 9 = $2,124,000

So, the ending overhead equals to

= Actual manufacturing overhead - actual overhead

= $2,126,000 - $2,124,000

= $2,000 under applied