Empire Computer Company applies overhead to jobs on the basis of machine hours. The total budget basis for machine hours is 500,000 and the total budgeted overhead for the period is $4,000,000. The total machine hours incurred for the period was 505,000 and the actual overhead incurred was $4,005,000. The amount of overhead applied during the year was:
a. $4,000,000
b. $4,005,000
c. none of these.
Selected: d. $4,040,000 This answer is correct.
Correct! Predetermined overhead rate = $4,000,000/500,000 = $8.00/machine hour. $8/hr X 505,000 hrs = $4,040,000.