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 Estimated manufacturing overhead cost Estimated direct labor cost Estimated direct labor hours Actual direct labor hours Estimated machine hours Actual machine hours By how much was manufacturing overhead overallocated or underallocated for the​ year? (Round intermediary calculations to the nearest​ cent.)

Answer 1

Answer: Underallocated for the year by $18,750

Explanation:

Company uses Predetermined overhead rate based on machine hours so;

Applied manufacturing overhead = Predetermined overhead rate * Actual machine hours

Predetermined rate = Estimated manufacturing overhead cost / Estimated machine hours

= 550,000/40,000

= $13.75 per machine hour

Applied manufacturing overhead = 13.75 * 35,000

= $‭481,250‬

Actual Manufacturing Overhead Cost = $500,000

= Applied Overhead - Actual Overhead

= ‭481,250‬ - 500,000

= -$18,750

This means that  manufacturing overhead was underallocated for the year by $18,750