The budgeted manufacturing overheads for an estimated 62500 units amounted to R500 000. The number of units produced was 60000. The actual manufacturing overheads were R512 500. Which of the following represents the over- or under-applied overheads?
A. R32 500 under-applied
B. R32 500 over-applied
C. R12 500 over-applied
D. R12 500 under-applied

Question

High School

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Answer :

MasonWilliamTurner MasonWilliamTurner · Answer 1 · 2025-01-28T22:01:45-05:00

To determine whether the overheads are over- or under-applied, we need to calculate the applied overheads and compare them with the actual overheads.

Calculate the Budgeted Overhead Rate
The budgeted overhead expenses for 62,500 units is R500,000. Therefore, the budgeted overhead rate is calculated as follows:
[tex]\text{Budgeted Overhead Rate} = \frac{\text{Budgeted Overheads}}{\text{Budgeted Units}} = \frac{R500,000}{62,500} = R8 \text{ per unit}[/tex]
Calculate the Applied Overheads for the Actual Production
The number of units actually produced was 60,000. Using the budgeted overhead rate, we apply the overheads to these units:
[tex]\text{Applied Overheads} = \text{Actual Units Produced} \times \text{Budgeted Overhead Rate} = 60,000 \times R8 = R480,000[/tex]
Compare the Applied Overheads to the Actual Overheads
The actual overheads were R512,500. We compare this to the applied overheads:
[tex]\text{Difference} = \text{Actual Overheads} - \text{Applied Overheads} = R512,500 - R480,000 = R32,500[/tex]
Since the actual overheads are greater than the applied overheads, this results in under-applied overheads.
Thus, the correct answer is A. R32,500 under-applied.