Question

Hilltop Manufacturing uses a predetermined manufacturing overhead rate based on machine hours to allocate manufacturing overhead to jobs. Selected data about the​ company's operations​ follows: Actual manufacturing overhead cost ​$500,000 Estimated manufacturing overhead cost ​$550,000 Estimated direct labor cost ​$175,800 Estimated direct labor hours ​ 50,500 Actual direct labor hours ​ 60,700 Estimated machine hours ​ 40,600 Actual machine hours ​ 35,800 By how much was manufacturing overhead overallocated or underallocated for the​ year? (Round intermediary calculations to the nearest​ cent.)

Answer 1

Answer:

Under-allocation of manufacturing overhead is $15,024.63

Explanation:

Actual manufacturing overhead cost ​$500,000

Estimated manufacturing overhead cost ​$550,000

Estimated direct labor cost ​$175,800

Estimated direct labor hours ​ 50,500

Actual direct labor hours ​ 60,700

Estimated machine hours ​ 40,600

Actual machine hours ​ 35,800

Predetermined Rate of Allocation = Estimated manufacturing overhead cost / Estimated machine hours

Predetermined Rate of Allocation = $550,000 / 40600

Predetermined Rate of Allocation = $13.54679803 / hour

Allocated Manufacturing overheads = Predetermined overhead rate x Actual Machine hours

Allocated Manufacturing overheads = $13.54679803 x 35,800

Allocated Manufacturing overheads = $484,975.37

Under / over allocation of manufacturing overhead = Actual manufacturing overhead - Allocated manufacturing overhead

Under / over allocation of manufacturing overhead = 500,000 - $484,975.37

Under-allocation of manufacturing overhead = $15,024.63