Answer:
Instructions are listed below
Explanation:
Giving the following information:
Overhead costs are expected to total $300,000 for the year, and machine usage is estimated at 125,000 hours.
For the year, $322,000 of overhead costs are incurred and 130,000 hours are used.
<u>First, we need to calculate the estimated overhead rate. Then, we can apply overhead based on actual machine hours. Finally, we determine the under/over allocated overhead.</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= 300,000/125,000= $2.4 per machine-hour
Now, we can allocate overhead:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Allocated MOH= 2.4*130,000= $312,000
Over/under allocation= real MOH - allocated MOH
Over/under allocation= 322,000 - 312,000= $10,000 underallocated
Cost of goods sold 10,000
Factory overhead 10,000
