Answer:
Underallocation= $2,250
Explanation:
Giving the following information:
The Corporation estimated that it would incur $255,000 in manufacturing overhead during the year and that it would work 100,000 machine-hours. The Corporation worked 105,000 machine-hours and incurred $270,000 in manufacturing overhead costs.
<u>To calculate the under/over application we need to calculate the estimated overhead rate. Then applied overhead to the period and compare it to the actual overhead incurred.</u>
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= 255,000/100,000= $2.55 per machine hour
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Allocated MOH= 2.55*105,000= $267,750
Now, we can calculate the under/over allocation:
Over/under allocation= real MOH - allocated MOH= 270,000 - 267,750= $2,250 underallocated