Cambridge Manufacturing Company applies manufacturing overhead on the basis of machine hours. At the beginning of the year, the company estimated its total overhead cost to be $325,000 and machine hours to be 25,000. Actual manufacturing overhead and machine hours were $372,000 and 26,000, respectively.

1. Compute the predetermined overhead rate per machine hour?

2. Compute applied manufacturing overhead?

3. Compute over- or underapplied manufacturing overhead.

To answer these questions, you need to understand the concept of predetermined overhead rate and how to calculate it, as well as how to calculate applied manufacturing overhead and over/underapplied manufacturing overhead.

1. To compute the predetermined overhead rate per machine hour:
Predetermined Overhead Rate = Estimated Total Overhead Cost / Estimated Machine Hours

In this case, the estimated total overhead cost is $325,000 and the estimated machine hours are 25,000.

Predetermined Overhead Rate = $325,000 / 25,000 = $13 per machine hour

2. To compute the applied manufacturing overhead:
Applied Manufacturing Overhead = Predetermined Overhead Rate * Actual Machine Hours

In this case, the predetermined overhead rate is $13 per machine hour and the actual machine hours are 26,000.

Applied Manufacturing Overhead = $13 * 26,000 = $338,000

3. To compute the over- or underapplied manufacturing overhead:
Overapplied Manufacturing Overhead = Applied Manufacturing Overhead - Actual Manufacturing Overhead
Underapplied Manufacturing Overhead = Actual Manufacturing Overhead - Applied Manufacturing Overhead

In this case, the actual manufacturing overhead is $372,000 and the applied manufacturing overhead is $338,000.

Overapplied Manufacturing Overhead = $338,000 - $372,000 = -$34,000 (negative indicates overapplied)
Underapplied Manufacturing Overhead = $372,000 - $338,000 = $34,000

So, the answers to the questions are:
1. The predetermined overhead rate per machine hour is $13.
2. The applied manufacturing overhead is $338,000.
3. The company has overapplied manufacturing overhead by $34,000.