Question

The following account balances at the beginning of January were selected from the general ledger of Fresh Bagel Manufacturing​ Company:

Work in process inventory	​$0
Raw materials inventory	$ 28 comma 400$28,400
Finished goods inventory	$ 40 comma 500$40,500

Additional​ data:

1. Actual manufacturing overhead for January amounted to $67,400.

2. The total direct labor cost for January was $63,700.

3. The predetermined manufacturing overhead rate is based on direct labor cost. The budget for the year called for $248,000

of direct labor cost and $322,400 of manufacturing, overhead costs.

4. The only job unfinished on January 31 was Job No.​ 151, for which total direct labor charges were $5,400 ​(900

direct labor​ hours) and total direct material charges were $14,900.

5. The cost of direct materials placed in production during January totaled $123,400.

There were no indirect material requisitions during January.

6. January 31 balance in raw materials inventory was $35,700.

7. The finished goods inventory balance on January 31 was $34,500.

Has manufacturing overhead been overallocated or under-allocated and by what amount as of January​ 31?

a. $15,410 unallocated

b $16,500 overallocated

c. $15,410 overallocated

d. $16,550 unallocated

Answer 1

Overhead rate = 322400/248000 = 130% of labor cost

Actual overhead = 67400

Applied overhead = 63700*1.3 = 82810

Over allocated = 82810-67400 = 15410

So answer is c) $15410 Over allocated