Tea Tree Manufacturing provided the following details for the year: Direct Materials Used $83,000; Direct Labor Incurred $191,000; Manufacturing Overhead Incurred $300,000; Manufacturing Overhead Allocated to production $$297,000; Costs of jobs completed and transferred $$500,000. Was Manufacturing Overhead overallocated or underallocated and by what amount?

Question

Business

Myles Barr

29 December, 14:29

Tea Tree Manufacturing provided the following details for the year: Direct Materials Used $83,000; Direct Labor Incurred $191,000; Manufacturing Overhead Incurred $300,000; Manufacturing Overhead Allocated to production $$297,000; Costs of jobs completed and transferred $$500,000. Was Manufacturing Overhead overallocated or underallocated and by what amount?

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Morgan Church · Answer 1

Therefore, Manufacturing Overhead is overallocated by $71,000.

Explanation:

This can be determined as follows:

Direct Materials Used + Direct Labor Incurred + Production Manufacturing Overhead = Costs of jobs completed and transferred

Substituting values for the equation above, we have:

$83,000 + $191,000 + Production Manufacturing Overhead = $500,000

Production Manufacturing Overhead = $500,000 - $83,000 + $191,000 = $226,000.00

Difference = $297,000 - $226,000 = $71,000 over allocation.

Therefore, Manufacturing Overhead is overallocated by $71,000.