Accounting: What the Numbers Mean 11th Edition by Wayne McManus,Daniel Viele,David Marshall

Exercise 21

Manufacturing overhead-over/underapplied Checker, Inc., produces automobile bumpers. Overhead is applied on the basis of machine hours required for cutting and fabricating. A predetermined overhead application rate of $12.70 per machine hour was established for 2016.
Required:
a. If 9,000 machine hours were expected to be used during 2016, how much overhead was expected to be incurred?
b. Actual overhead incurred during 2016 totaled $121,650, and 9,100 machine hours were used during 2016. Calculate the amount of over- or underapplied overhead for 2016.
c. Explain the accounting necessary for the over- or underapplied overhead for the year.