Mango Company applies overhead based on direct labor costs. For the current year, Mango Company estimated total overhead costs to be $480,000, and direct labor costs to be $240,000. Actual overhead costs for the year totaled $501,000, and actual direct labor costs totaled $269,000. At year-end, Factory Overhead account is:a. Overapplied by $10, 000 b. Overapplied by $170, 000. c. Underapplied by $10, 000.

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Business

Katherine

20 June, 19:35

Mango Company applies overhead based on direct labor costs. For the current year, Mango Company estimated total overhead costs to be $480,000, and direct labor costs to be $240,000. Actual overhead costs for the year totaled $501,000, and actual direct labor costs totaled $269,000. At year-end, Factory Overhead account is:a. Overapplied by $10, 000 b. Overapplied by $170, 000. c. Underapplied by $10, 000.

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Answers (1)

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Azul Rangel · Answer 1

The correct answer is $37,000 overapplied

Explanation:

Giving the following information:

Mango Company applies overhead based on direct labor costs. For the current year, Mango Company estimated total overhead costs to be $480,000, and direct labor costs to be $240,000. Actual overhead costs for the year totaled $501,000, and actual direct labor costs totaled $269,000.

First, we need to calculate the allocated overhead for the period. To allocate we need to determine the estimated overhead rate:

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

Estimated manufacturing overhead rate = 480,000/240,000 = $2 per direct labor dollar

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

Allocated MOH = 2*269,00 = $538,000

Over/under allocation = real MOH - allocated MOH

Over/under allocation = 501,000 - 538,000 = $37,000 overallocated