The following cost data relate to the manufacturing activities of Newberry Company during the just completed year:

Newberry Company's cost data

Total actual manufacturing overhead cost incurred

$372,000

Predetermined overhead rate

$18 per machine-hour

Actual machine-hours recorded

21,000 machine-hours

Manufacturing overhead for the year is:

Question

The following cost data relate to the manufacturing activities of Newberry Company during the just completed year:

Newberry Company's cost data

Total actual manufacturing overhead cost incurred

$372,000

Predetermined overhead rate

$18 per machine-hour

Actual machine-hours recorded

21,000 machine-hours

Manufacturing overhead for the year is:

BlackTom AI · Accepted Answer

1. Relevant knowledge and concepts
Applied manufacturing overhead is computed by multiplying the predetermined overhead rate (POHR) by the actual activity base used (here, machine-hours). Overapplied overhead means the amount applied to production (using POHR) exceeds the actual overhead incurred; underapplied means the opposite.

2. Complete reasoning, step by step
POHR is given as $18 per machine-hour. Actual machine-hours recorded = 21,000 machine-hours. Therefore applied overhead = POHR × actual machine-hours.

3. Calculations with intermediate steps
Applied overhead = $18/machine-hour × 21,000 machine-hours
Applied overhead = $18 × 21,000
Applied overhead = $378,000

Actual manufacturing overhead incurred = $372,000.

Difference = Applied overhead − Actual overhead
Difference = $378,000 − $372,000
Difference = $6,000

4. Why the correct answer is correct
Because the applied overhead ($378,000) is greater than the actual overhead incurred ($372,000) by $6,000, the overhead is overapplied by $6,000. That matches the definition of overapplied overhead (applied > actual).

5. Why the other options are incorrect
- $12,000 overapplied: would require applied − actual = $12,000, but the real difference is $6,000, so this is wrong.
- $12,000 underapplied: would require actual − applied = $12,000 (actual > applied), which is not the case here.
- $6,000 underapplied: has the correct magnitude but the wrong sign; applied exceeds actual, so the correct term is overapplied, not underapplied.

6. Conclusion
The manufacturing overhead for the year is $6,000 overapplied, which matches the provided correct answer.

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