Answer:
Under/over applied overhead= $10,000 underallocated
Explanation:
Giving the following information:
Overhead costs are estimated to be $300,000.
The estimated machine hours are 125,000 hours.
During the year, actual overhead costs totaled $322,0000 and it incurred 130,000 machine hours.
First, we need to calculate the estimated manufacturing overhead rate:
Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Estimated manufacturing overhead rate= 300,000/125,000= $2.4 per machine hour
Now, we can allocate overhead
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Allocated MOH= 2.4*130,000= $312,000
Finally, we determine the under/over allocation:
Under/over applied overhead= real overhead - allocated overhead
Under/over applied overhead= 322,000 - 312,000= $10,000 underallocated
