Poole Company applies manufacturing overhead (MOH) using a pre-determined overhe
ID: 2562867 • Letter: P
Question
Poole Company applies manufacturing overhead (MOH) using a pre-determined overhead rate (POHR) based on
machine hours (MHs) with the following information for the period:
MHs estimated for the period 250,000
MHs actually incurred in the period 258,000
POHR for the period $ 5.50 per MH
Actual MOH for the period $ 1,410,000
The activity for the period was significantly less than Poole's capacity of 275,000 MHs, and so the CEO has
asked about the impact of using a POHR based on capacity. If this is done, how much lower will the company's
applied MOH be versus the traditional method?
A. $ 87,720
B. $ 129,000
C. $ 96,164
D. $ 85,000
E. None of the above
Explanation / Answer
B. $ 129,000 POHR for the period = $ 5.50 per MH MHs estimated for the period = 250,000 Hence total overhead costs budgeted = 250000*$5.5 = $1375000 Poole's capacity = 275,000 MHs POHR for the period based on total capacity = $1375000/275000 = $ 5 per MH MHs actually incurred in the period 258,000 Difference in applied MOH compared to traditional method = 258000*($5.5-$5) = $129000