Answer: Lorein company's actual manufacturing overhead is greater than applied manufacturing overhead, so overhead has been under-applied to the extent of $100,000.
We have:
Estimated Manufacturing overhead = $650,000
Estimated Direct Labor hours = 130,000 hours
Actual Manufacturing Overhead = $650,000
Actual Direct Labor hours = 110,000 hours.
<u>Calculation of Estimated (Predetermined) Overhead rate:</u>


<u>Calculation of Applied manufacturing overhead:</u>
![Applied overhead = Estimated overhead rate * Actual production hours [/tex][tex] Applied overhead = $550,000 (5 * 110,000)](https://tex.z-dn.net/?f=%20Applied%20overhead%20%3D%20Estimated%20overhead%20rate%20%2A%20Actual%20production%20hours%20%5B%2Ftex%3C%2Fstrong%3E%5D%3C%2Fp%3E%3Cp%3E%3Cstrong%3E%5Btex%5D%20Applied%20overhead%20%3D%20%24550%2C000%20%285%20%2A%20110%2C000%29%20)
<u>Calculation of underapplied or overapplied manufacturing overhead:</u>
Under or over applied overhead = Actual Overhead - Applied Overhead
If actual overheads are less than applied overheads, then overheads have been over-applied.
If actual overheads are more than applied overheads, then overheads have been under-applied.
In this case,
