Question

If estimated annual factory overhead is $480,000; overhead is applied using direct labor hours; estimated annual direct labor hours are 200,000; actual March factory overhead is $41,000; and actual March direct labor hours are 17,000; then overhead is:

Answer 1

Undeapplied overhead= $200

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= 480,000 / 200,000

Predetermined manufacturing overhead rate= $2.4 per DLH

Now, we can allocate overhead:

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

Allocated MOH= 2.4*17,000

Allocated MOH= $40,800

Finally, the over/under allocation:

Under/over applied overhead= real overhead - allocated overhead

Under/over applied overhead= 41,000 - 40,800

Undeapplied overhead= $200