Answer:
Instructions are below.
Explanation:
Giving the following information:
Estimated Overhead cost= $1,680,000
Estimated Labor cost= $480,000
Actual:
Overhead costs= $1,652,000.
Actual Direct Labor costs= $475,000
<u>First, we need to calculate the predetermined overhead rate:</u>
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Predetermined manufacturing overhead rate= 1,680,000/480,000
Predetermined manufacturing overhead rate= $3.5 per direct labor dollar
<u>Now, we allocate overhead:</u>
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Allocated MOH= 3.5*475,000= $1,662,500
<u>To calculate any under/over allocation, we will use the following formula:</u>
Under/over applied overhead= real overhead - allocated overhead
Under/over applied overhead= 1,652,000 - 1,662,500
Under/over applied overhead= $10,500 underallocated
<u>Finally, the adjusting entry:</u>
Cost of goods sold 10,500
underapplied overhead 10,500
