How much manufacturing overhead was incurred during the year? Is manufacturing overhead underallocated or overallocated at the
end of the year? By how much?
1 answer:
Answer:
1. Overhead incurred during the year;
= Depreciation on manufacturing plant and equipment + Property taxes on plant + Plant Janitors wages
= 485,000 + 19,000 + 9,500
= $513,500
2. The under or over allocation depends on how much manufacturing overhead was allocated to jobs for the year.
= Actual machine hours * Overhead rate
Overhead rate = Manufacturing overhead cost / Allocated Machine hours
= 570,000 / 71,250
= $8
Allocated Manufacturing Overhead = 57,000 * 8
= $456,000
The allocated manufacturing overhead is more than the actual overhead. This means that it is Underallocated and the company did not budget enough for the overheads.
Underallocation = 513,500 - 456,000
= $57,500
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