Babcox Manufacturing uses a predetermined manufacturing overhead rate based on m
ID: 2416381 • Letter: B
Question
Babcox Manufacturing uses a predetermined manufacturing overhead rate based on machine hours to allocate manufacturing overhead to jobs. Selected data about the company’s operations follows:
Actual manufacturing overhead cost
$430,000
Estimated manufacturing overhead cost
$400,000
Estimated direct labor cost
$180,000
Estimated direct labor hours
60,000
Actual direct labor hours
55,000
Estimated machine hours
80,000
Actual machine hours
84,000
By how much was manufacturing overhead overallocated or underallocated for the year?
$20,000 underallocated
$10,000 overallocated
$20,000 overallocated
$10,000 underallocated
Actual manufacturing overhead cost
$430,000
Estimated manufacturing overhead cost
$400,000
Estimated direct labor cost
$180,000
Estimated direct labor hours
60,000
Actual direct labor hours
55,000
Estimated machine hours
80,000
Actual machine hours
84,000
Explanation / Answer
Answer . D. $10000 underallocated Estimated Manufacturing Overhead Cost (A) 400,000 Estimated machine Hours (B) 80000 Actual Machine Hours © 84000 Manufacturing Overhead Rate per Machine Hour (D = A/B) 5 Estimated Manufacturing overhead at Actual machine Hrs (C X D) 420000 Actual Manufacturing Overhead Cost 430000 Manufacturing Overhead Underallocated 10000
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