Babcox Manufacturing uses a predetermined manufacturing overhead rate based on m
ID: 2422448 • 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
Can you please explain?
Is it
10,000 overallocated?
10,000 underallocated?
20,000 overallocated?
20,000 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
Predetermined overhead rate = Estimated overhead cost / Estimated machine hours
= 400,000 /80,000
= $ 5 per machine hour
Allocated overhead = 5 * 84000 = 420,000
Actual overhead = 430,000
Overhead underallocated = 430,000 - 420,000 = 10,000
correct option is "B" -
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.