Answer:
Under/over applied overhead= $1,899,000 underallocated
Explanation:
Giving the following information:
Estimated overhead= $11,420,000
Estimated machine-hours= 157,000
Actual overhead is $7,958,000 and the actual machine hours are 83,000 hours.
First, we need to calculate the predetermined overhead rate:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Predetermined manufacturing overhead rate= 11,420,000/157,000
Predetermined manufacturing overhead rate= $73 per machine hour
Now, we can allocate overhead:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Allocated MOH= 73*83,000= $6,059,000
Finally, we can determine the under/over allocation:
Under/over applied overhead= real overhead - allocated overhead
Under/over applied overhead= 7,958,000 - 6,059,000
Under/over applied overhead= $1,899,000 underallocated
