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Yista Corporation uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. The company estimated manufacturing overhead at $510,000 for the year and direct labor-hours at 100,000 hours. Actual manufacturing overhead costs incurred during the year totaled $520,000. Actual direct labor-hours were 105,000. What was the overapplied or underapplied overhead for the year? A. $15,500 overappliedB. $30,000 underappliedC. $30,000 overappliedD. $10,000 underapplied

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Answer:

The correct answer is A.

Explanation:

Giving the following information:

The company estimated manufacturing overhead at $510,000 for the year and direct labor-hours at 100,000 hours.

The actual manufacturing overhead costs incurred during the year totaled $520,000. Actual direct labor-hours were 105,000.

First, we need to calculate the estimated overhead rate. After, we need to allocate overhead. Finally, we will calculate the over/under allocation.

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= 510,000/100,000= $5.1 per direct labor hour

Now, we can allocate overhead:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Allocated MOH= 5.1*105,000= $535,500

Over/under allocation= real MOH - allocated MOH

Over/under allocation=  520,000 - 535,500= $15,500 overallocated

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