Question

Overallocated/overcosted overhead occurs when

A. allocated overhead all year long is less than the actual manacturing overhead at year end

B. estimated overhead at the beginning of the year is greater than the actual manacturing overhead at year end

C. allocated overhead all year long is greater than the actual manacturing overhead at year end

D. estimated overhead at the beginning of the year is less than the actual manacturing overhead at year end

Answer 1

Solution: The answer is

C. Allocated overhead all year long is greater than the actual manufacturing overhead at year end

Reason:

1) Allocated Overhead are nothing but estimated overhead which are determined before beginning the manufacturing, there are just estimation based on the previous or industry standard.

2) At the year end, the entity will come to know the actual manufacturing overheads.

3) If Allocated Manufacturing Overhead are more than Actual manufacturing overhead, then it is Over allocated / Over costed overhead and If Allocated Manufacturing Overhead are less than Actual Manufacturing Overhead, then it is Under allocated.

Allocated Overhead > Actual Overhead	Over Allocated
Allocated Overhead < Actual Overhead	Under Allocated

4) So, remaining options a,b,d are incorrect.