Question

Biltz Company uses a predetermined overhead rate based on direct labor hours to allocate manufacturing overhead to jobs. During the year, the company actually incurred manufacturing overhead costs of $582,100 and 135,000 direct labor hours were worked. The company estimated that it would incur $525,400 of manufacturing overhead during the year and that 150,400 direct labor hours would be worked. By how much was manufacturing overhead overallocated or underallocated for the year?

Answer 1

manufacturing overhead underallocated for the year $124,102.4

Step-by-step explanation:

`(Cost\: Of \:Manufacturing \:Overhead)/(Cost \:Driver)= Overhead \:Rate`

we distribute the expecte rate over the cost dirver

582,100 / 135,000 = 4.3185

150400 x 4.3185 = 649502.4 applied overhead

applied - actual = over or underappied

if actual > applied = underapplied

if actual < applied = overhead

525,400 - 649,502.4 = -124,102.4