uses a predetermined manufacturing overhead rate based on direct labor hours Cou
ID: 2402512 • Letter: U
Question
uses a predetermined manufacturing overhead rate based on direct labor hours Cougar Corporation to allocate manufacturing overhead to jobs. Here are data regarding Cougar's current year operations Estimated Actual $400,000 $455,000 Manufacturing overhead costs Direct labor costs Direct labor hours Machine hours $180,000 50,000 80,000 $195,000 55,000 84,000 What is the amount of over-allocated or under-allocated overhead for the year? $15,000 over-allocated $15,000 under-allocated $55,000 over-allocated $55,000 under-allocated None of the aboveExplanation / Answer
Solution: Predetermined overhead rate =Estimated overhead / Estimated direct labour hours
= $400,000 / 50,000
= $8
Allocating overhead = Predetermined overhead rate x Actual direct labour hours
= $8 x 55,000
= $440,000
Actual overhead = $455,000
Since, Actual overhead is more than allocating overhead.
Hence, Under allocated overhead = $455,000 -$440,000
= $15,000 (answer is b )
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