Scottso Corporation applies overhead using an actual costing approach. Budgeted factory overhead was $266,400, budgeted machine-hours were 18,500. Actual factory overhead was $287,920, actual machine-hours were 19,050. How much overhead would be applied to production? a. $266,400. b. $274,320. c. $279,607. d. $287,920.

Option (b) is correct.

Explanation:

Given that,

Budgeted factory overhead = $266,400,

Budgeted machine-hours = 18,500

Actual factory overhead = $287,920,

Actual machine-hours = 19,050

Budgeted rate:

= Budgeted factory overhead ÷ Budgeted machine-hours

= $266,400 ÷ 18,500

= $14.4

Overhead allocated:

= Actual machine-hours × Budgeted rate

= 19,050 × $14.4

= $274,320

Here, the allocated overhead is less than the actual factory overhead. Hence, the overhead is under-allocated.

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