Before the year began, Coia Manufacturing estimated that manufacturing over $200

Question

Before the year began, Coia Manufacturing estimated that manufacturing over $200,000 and that 25,000 direct labor hours would be worked. Actual results for the year in following: head for the year would be cluded the Actual manufacturing overhead cost Actual direct labor hours $182,000 20,000 f the company allocates manufacturing overhead based on direct labor hours, the manufacturing he year would have been A) $18,000 undera!located. B) $18,000 overallocated C) $22,000 underallocated. D) $22,000 overallocated overhead for

Explanation / Answer

Overhead allocation rate

= Budgeted overhead / Budgeted direct labor hours

= $200,000 / 25,000

= $8 per direct labor hour

Overhead allocated based on actual results

= Actual labor hour x Overhead allocation rate

= 20,000 x $8

= $160,000

So, under allocated overhead

= Actual overhead – Allocated overhead

= $182,000 - $160,000

= $22,000 under allocated overhead

So, as per above calculations, option C is the correct option

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