Barefoot Running Company's work in process inventory on June 1 has a balance of $22,900 representing Job No. 265. During June, $50,700 of direct materials were requisitioned for Job No. 265 and $35,500 of direct labor cost was incurred on Job No. 265. Manufacturing overhead is allocated at 130% of direct labor cost. Actual manufacturing overhead costs incurred in June amounted to $41,300. No new jobs were started during June. Job No. 265 is completed on June 28. Is manufacturing overhead overallocated or underallocated for the month of June? By how much?

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Quizplus · Accepted Answer

Manufacturing overhead allocated = 130% of direct labor cost = 130% * $35,500 = $46,150. Actual manufacturing overhead costs = $41,300. Difference = $46,150 - $41,300 = $4,850. Since allocated overhead is greater than actual overhead costs, manufacturing overhead is overallocated by $4,850.

Barefoot Running Company's Work in Process Inventory on June 1