Problem:
Tortolla Company is a manufacturing firm that uses a job-order costing system. The company uses machine hours to apply overhead to work in process. On January 1, Tortolla's management estimated that it would incur $700,000 in manufacturing overhead costs and 56,000 machine hours over the coming year.
Q1. Compute the company's predetermined overhead rate for the year.
Q2. Assume that the company uses only 54,000 machine hours over the year and incurs the following manufacturing costs:
| Maintantence $56,000 |
| Depreciation $206,000 |
| Indirect Materials $76,000 |
| Utilities $164,000 |
| Insurance $94,000 |
| Indirect Labor $64,000 |
Compute the amount of overhead that was applied to production and the amount of over-or underapplied overhead for the period.