Answer:
Underapplied overhead= $3,900 underapplied
Explanation:
Giving the following information:
Osborn Manufacturing uses a predetermined overhead rate of $19.70 per direct labor-hour. The company incurred $260,000 of manufacturing overhead and 13,000 direct labor-hours during the period.
<u>The under or overapplied overhead is the difference between the allocated overhead and the real overhead for the period.</u>
First, we need to calculate the allocated overhead:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Allocated MOH= 19.7*13,000= $256,100
Now, using the following formula, we calculate the over/under applied overhead:
Under/over applied overhead= real overhead - allocated overhead
Under/over applied overhead= 260,000 - 256,100= $3,900 underapplied
