Babcox Manufacturing uses a predetermined manufacturing overhead rate based on direct labour 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?

Question

Babcox Manufacturing uses a predetermined manufacturing overhead rate based on direct labour 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?

Quizplus · Accepted Answer

To calculate the manufacturing overhead rate, divide total estimated manufacturing overhead costs by total estimated direct labor hours: ($420,000 / 35,000) = $12 per direct labor hour. Actual manufacturing overhead costs were $412,500 and actual direct labor hours were 34,500. The applied manufacturing overhead would be (34,500 x $12) = $414,000. Therefore, the manufacturing overhead was underallocated by ($414,000 - $412,500) = $1,500.

Babcox Manufacturing Uses a Predetermined Manufacturing Overhead Rate Based on Direct