Answer:
Over/under allocation= $11,900 underallocated
Explanation:
Giving the following information:
At the beginning of the year, Adams estimated total overhead of $358,700; and direct labor of $211,000. During the year Adams incurred $377,400 in overhead costs and $215,000 on direct labor costs.
<u>First, we need to calculate the estimated overhead rate. Then, allocate overhead based on actual direct labor dollars. Finally, determine the under/over allocation.</u>
To calculate the estimated manufacturing overhead rate we need to use the following formula:
Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Estimated manufacturing overhead rate= 358,700/211,00= $1.7 per direct labor dollar
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Allocated MOH= 1.7*215,000= $365,500
Finally, we calculate the under/over allocation:
Over/under allocation= real MOH - allocated MOH
Over/under allocation=377,400 - 365,500= $11,900 underallocated
