Question

Winston Company estimates that the factory overhead for the following year will be $478,800. The company has decided that the basis for applying factory overhead should be machine hours, which is estimated to be 26,600 hours. The total machine hours for the year were 54,000 hours. The actual factory overhead for the year was $986,000. Enter the amount as a positive number.

Answer 1

Results are below.

Step-by-step explanation:

First, we need to calculate the predetermined overhead rate:

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

Predetermined manufacturing overhead rate= 478,800 / 26,600

Predetermined manufacturing overhead rate= $18 per machine hour

Now, we can allocate overhead:

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

Allocated MOH= 18*54,000

Allocated MOH= $972,000

Finally, the over/under allocation:

Under/over applied overhead= real overhead - allocated overhead

Under/over applied overhead= 986,000 - 972,000

Underallocated overhead= $14,000