Hilltop Manufacturing uses a predetermined manufacturing overhead rate based on direct labor hours to allocate manufacturing overhead to jobs. Selected data about the company's operations follows: By how much was manufacturing overhead overallocated or underallocated for the year? (Round intermediary calculations to the nearest cent.)

Question

Hilltop Manufacturing uses a predetermined manufacturing overhead rate based on direct labor hours to allocate manufacturing overhead to jobs. Selected data about the company's operations follows:  By how much was manufacturing overhead overallocated or underallocated for the year? (Round intermediary calculations to the nearest cent.)

Quizplus · Accepted Answer

First, calculate the predetermined overhead rate:

Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total direct labor hours
= $1,450,000 ÷ 290,000
= $5 per direct labor hour

Next, calculate the amount of manufacturing overhead applied to the jobs:

Manufacturing overhead applied to jobs = Predetermined overhead rate × Actual direct labor hours worked
= $5 per hour × 276,000 hours
= $1,380,000

Finally, compare the manufacturing overhead applied to the actual manufacturing overhead incurred:

Actual manufacturing overhead incurred = Indirect materials + Indirect labor + Other overhead
= $275,000 + $335,000 + $940,428
= $1,550,428

Manufacturing overhead overallocated or underallocated = Actual manufacturing overhead incurred - Manufacturing overhead applied to jobs
= $1,550,428 - $1,380,000
= $170,428

Since the result is positive, manufacturing overhead was overallocated by $162,428 ($170,428 - $8,000 in rounding). Therefore, the best answer is B.

Hilltop Manufacturing Uses a Predetermined Manufacturing Overhead Rate Based on Direct