Acer Corporation, which applies manufacturing overhead on the basis of machine-hours, has provided the following data for its most recent year of operations.
Estimated manufacturing overhead$224,550
Estimated machine-hours 4,500
Actual manufacturing overhead$224,000
Actual machine-hours4,440
The estimates of the manufacturing overhead and of machine-hours were made at the beginning of the year for the purpose of computing the company's predetermined overhead rate for the year.
The overhead for the year is closest to:.
a. $2,994 under-applied. b. $2,444 over-applied. c. $2,444 under-applied. d. $2,994 over-applied.

c. $ 2,244 under applied

Explanation:

We need to compute the pre determined manufacturing overhead on the basis of machine hours.

Estimated manufacturing overhead                        $ 224,550

Estimated machine hours                                               4,500 hours

Predetermined manufacturing overhead  $224,550 /4500 = $ 49.9 per hour

Based on this predetermined overhead rate the applied overhead on the actual hours is:

Actual machine Hours * Manufacturing overhead per hour

4,440 hours * $ 49.9 per hour   =                                               $ 221,556          

The actual manufacturing overhead   =                                     $  224,000

Under applied overhead                                                           $ (  2,444)    

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