A manufacturing company applies factory overhead based on direct labor hours. At the beginning of the year, it estimated that factory overhead costs would be $362,655 and direct labor hours would be 40,295. Actual factory overhead costs incurred were $445,098, and actual direct labor hours were 51,516. What is the amount of overapplied or underapplied manufacturing overhead at the end of the year

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Business

Paloma Marshall

19 May, 05:56

A manufacturing company applies factory overhead based on direct labor hours. At the beginning of the year, it estimated that factory overhead costs would be $362,655 and direct labor hours would be 40,295. Actual factory overhead costs incurred were $445,098, and actual direct labor hours were 51,516. What is the amount of overapplied or underapplied manufacturing overhead at the end of the year

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Dylan Herrera · Answer 1

Under/over applied overhead = $18,546 overallocated

Explanation:

Giving the following information:

Estimated factory overhead costs = $362,655

Estimated direct labor hours = 40,295.

Actual factory overhead costs incurred were $445,098, and actual direct labor hours were 51,516

Firsts, we need to calculate the predetermined overhead rate:

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

Estimated manufacturing overhead rate = 362,655/40,295

Estimated manufacturing overhead rate = $9 per direct labor hour

Now, we need to allocate overhead:

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

Allocated MOH = 9*51,516 = $463,644

Finally, we determine the under/over allocated overhead:

Under/over applied overhead = real overhead - allocated overhead

Under/over applied overhead = 445,098 - 463,644 = $18,546 overallocated