A company uses normal costing. It allocates manufacturing overhead using a predetermined rate based on the number...
A company uses normal costing. It allocates manufacturing overhead using a predetermined rate based on the number of direct labor hours incurred. The following data is available for 2019:
Budgeted manufacturing overhead costs = $2,000,000
Budgeted direct labor hours = 200,000
Actual manufacturing overhead costs = $2,100,000
Actual direct labor hours = 190,000
Based on this information, would manufacturing overhead be over- or under-allocated?
Homework Answers
Predetermine overhead rate = Estimated overhead/estimated labor hour = 2000000/200000 = 10 per labor hour
Applied overhead = 190000*10 = 1900000
Actual overhead = 2100000
Under applied overhead = 200000
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Budgeted manufacturing overhead cost
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Actual manufacturing overhead cost
$172,000
Actual direct manufacturing labor cost
$250,000
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