Answer:
Underapplied overhead= $1,640
Explanation:
<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= 497,040 / 21,800
Predetermined manufacturing overhead rate= $22.8 per direct labor hour
<u>Now, we can allocate overhead:</u>
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Allocated MOH= 22.8*21,500
Allocated MOH= $490,200
<u>Finally, the over/under allocation:</u>
Under/over applied overhead= real overhead - allocated overhead
Under/over applied overhead= 492,040 - 490,200
Underapplied overhead= $1,640