Answer:
The correct answer is A.
Explanation:
Giving the following information:
The company based its predetermined overhead rate on the total estimated overhead of $244,800 and 9,800 estimated direct labor-hours.
The actual direct labor-hours were 6,300.
Actual manufacturing overhead for the year amounted to $245,400
First, we need to calculate the estimated manufacturing overhead rate we need to use the following formula:
Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Estimated manufacturing overhead rate= 244,800/9,800= $25 per direct labor hour.
Now, we can allocate overhead based on actual direct labor hour:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Allocated MOH= 25*6,300= $157,500
Over/under allocation= real MOH - allocated MOH
Over/under allocation=245,400 - 157,500= $87,900 underallocated
