Question

Winston Company estimates that the factory overhead for the following year will be $544,000. The company has decided that the basis for applying factory overhead should be machine hours, which is estimated to be 27,200 hours. The total machine hours for the year were 54,900 hours. The actual factory overhead for the year was $1,113,000. Enter the amount as a positive number.

Answer 1

Answer:

Instructions are listed below.

Explanation:

Giving the following information:

The estimated factory overhead= $544,000.

The estimated machine-hours= 27,200 hours.

The total machine hours for the year were 54,900 hours.

The actual factory overhead for the year was $1,113,000.

I assume that the requirement is to calculate the amount of over/under allocation of overhead for the period.

First, we need to calculate the estimated overhead rate. Then, allocate overhead based on actual machine-hours. Finally, we determine the under/over allocation.

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= 544,000/27,200= $20 per machine-hour

Now, we can allocate overhead:

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

Allocated MOH= 20*54,900= $1,098,000

Finally, we calculate the over/under allocation:

Over/under allocation= real MOH - allocated MOH

Over/under allocation= 1,113,000 - 1,098,000= $15,000 underallocated