Yista Corporation uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. The company estimated manufacturing overhead at $510,000 for the year and direct labor-hours at 100,000 hours. Actual manufacturing overhead costs incurred during the year totaled $520,000. Actual direct labor-hours were 105,000. What was the overapplied or underapplied overhead for the year? A. $15,500 overappliedB. $30,000 underappliedC. $30,000 overappliedD. $10,000 underapplied

The correct answer is A.

Explanation:

Giving the following information:

The company estimated manufacturing overhead at $510,000 for the year and direct labor-hours at 100,000 hours.

The actual manufacturing overhead costs incurred during the year totaled $520,000. Actual direct labor-hours were 105,000.

First, we need to calculate the estimated overhead rate. After, we need to allocate overhead. Finally, we will calculate the over/under allocation.

To calculate the estimated manufacturing overhead rate we need to use the following formula:

Estimated manufacturing overhead rate = total estimated overhead costs for the period / total amount of allocation base

Estimated manufacturing overhead rate = 510,000/100,000 = $5.1 per direct labor hour

Now, we can allocate overhead:

Allocated MOH = Estimated manufacturing overhead rate * Actual amount of allocation base

Allocated MOH = 5.1*105,000 = $535,500

Over/under allocation = real MOH - allocated MOH

Over/under allocation = 520,000 - 535,500 = $15,500 overallocated