Bosch Company uses a job costing system.Bosch Company estimated manufacturing overhead costs for the year at $352,000,based on 160,000 estimated direct labor hours.Actual direct labor hours for the year totaled 198,000.Actual manufacturing overhead for the year was $395,300. By how much was manufacturing overhead overallocated or underallocated for the year?

Question

Quizplus · Accepted Answer

To calculate the amount of manufacturing overhead overallocated or underallocated, we need to compare the actual manufacturing overhead costs with the amount of manufacturing overhead costs that were allocated based on the estimated direct labor hours.

The predetermined overhead rate is calculated as follows:

Predetermined Overhead Rate = Estimated Manufacturing Overhead Cost / Estimated Direct Labor Hours

= $352,000 / 160,000 hours

= $2.20 per direct labor hour

Using this rate, we can calculate the amount of manufacturing overhead costs that should have been allocated based on the actual direct labor hours:

Allocated Manufacturing Overhead = Predetermined Overhead Rate x Actual Direct Labor Hours

= $2.20 x 198,000 hours

= $435,600

Since the actual manufacturing overhead costs were only $395,300, the manufacturing overhead was overallocated:

Overallocated Manufacturing Overhead = Allocated Manufacturing Overhead – Actual Manufacturing Overhead

= $435,600 - $395,300

= $40,300

Therefore, the correct answer is C) $40,300 overallocated.

Bosch Company Uses a Job Costing System