Question

Crich Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 22,180 hours and the total estimated manufacturing overhead was $589,988. At the end of the year, actual direct labor-hours for the year were 22,150 hours and the actual manufacturing overhead for the year was $589,988.
Required:
1. Overhead at the end of the year was ___________.

Answer 1

Answer:

Under/over applied overhead= $798 overallocated

Explanation:

Giving the following information:

Estimated manufacturing  overhead= $589,988

Estimated direct labor hours= 22,180

Actual direct labor-hours= 22,150 hours

Actual manufacturing overhead= $589,988

We need to determine whether the manufacturing overhead was over-allocated or under-allocated.

First, we need to calculate the estimated overhead rate:

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Estimated manufacturing overhead rate= 589,988/22,180= $26.6 per direct labor hour

Now, we can allocate overhead:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Allocated MOH= 26.6*22,150= $589,190

Finally, we calculate the under/over allocation:

Under/over applied overhead= real overhead - allocated overhead

Under/over applied overhead= 589,988 - 589,190= $798 overallocated