Question

Summer 20 Corp estimates overhead based on direct labor hours and has given you the following...

Summer 20 Corp estimates overhead based on direct labor hours and has given you the following information:

Estimated Manufacturing Overhead Costs 2020 $500,000
Estimated Direct Labor Hours for 2020 220,000
Actual Direct Labor Hours for 2020 202,000
Manufacturing Overhead Account Debit Entries total $450,000

1. Determine the predetermined overhead allocation rate.

2. Determine the amount of manufacturing overhead that were allocated.

3. Calculate the amount Summer 20 Corp is over or under allocated during the year. (Be sure to specify over or under allocated along with the dollar value.)

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Answer #1

Answer:

1. Determination of the predetermined overhead allocation rate:

Predetermined overhead allocation rate = Estimated manufacturing overhead costs / Estimated direct labor hrs

= $500,000 / 220,000 hrs.

= 2.273 (rounded off)

2. Determination of the amount of manufacturing overhead that were allocated:

Allocated manufacturing overhead = Actual direct labor hrs x Predetermined overhead allocation rate

= 202,000 hrs. x $2.273

= $459,146

3. Calculation of the amount Summer 20 Corp is over or under-allocated during the year:

Particulars Amount
Allocated manufacturing overhead $459,146
Less: Actual manufacturing overhead $450,000
Over allocated manufacturing overhead $9,146
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