Question

In a company where manufacturing overhead is applied based on machine hours, the predetermined allocation rate is $3 per machine hour. Actual machine hours were 3,000 and actual manufacturing overhead was $8,000. Is overhead underallocated or overallocated and by how much?

Answer 1

The overhead is over allocated by $1000.

Explanation:

The manufacturing overhead is applied based on machine hours, the predetermined allocation rate is $3 per machine hour.

Actual machine hours were 3,000 making the cost as =
`3000*3=9000`dollars

But the actual manufacturing overhead was $8,000.

So, the overhead is over allocated by =
`9000-8000=1000` dollars

Therefore, the answer is over allocated by $1000.