Question

Wilmington Company had estimated $741,000 of manufacturing overhead​ (MOH) for the year and 57,000 direct labor​ (DL) hours, resulting in a predetermined MOH rate of $13 per DL hour. By the end of that​ year, the company had actually incurred $675,000 of MOH costs and had used a total of 54,000 DL hours on various jobs.

1. By how much did the company overallocate or underallocate MOH for the​ year?

2. Was MOH overallocated or underallocated for the​ year? How do you​ know?

1. By how much did the company overallocate or underallocate MOH for the​ year?

The company overallocated or underallocated MOH by $

?

for the year.

2. Was MOH overallocated or underallocated for the​ year? How do you​ know?

MOH was _________ . We know this because the ________ exceeded the __________ for the year.

Answer 1

Answers

• Working

A	Actual Direct Labor hours	54,000
B	Predetermined Overhead rate	$13
C = A x B	Applied Overhead	$702,000
D [given]	Actual manufacturing overhead	$675,000
	Overheads are	OVER - ALLOCATED
		because Applied overheads are MORE than Actual overheads
E = C - D	Over - allocated by	$27,000

• Requirement 1

The company over-allocated MOH by $ 27,000 for the year.

• Requirement 2

CAN BE DONE IN TWO ALTERNATIVE WAYS:
#1.MOH was Over-Allocated. We know this because the Allocated or Applied manufacturing Overhead exceeded the Actual manufacturing Overhead for the year.

OR

#2.MOH was Over-Allocated. We know this because the estimated direct labor hours exceeded the actual direct labor hours for the year.