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A Company uses a predetermined overhead rate based on direct labor hours to allocate manufacturing overhead to jobs. At the beginning of the year, the company estimated manufacturing overhead would be $150,000 and direct labor hours would be 10,000. The actual figures for the year were $186,000 for manufacturing overhead and 12,000 direct labor hours. The cost records for the year will show:________.
a. over-allocated overhead of $6,000.
b. under-allocated overhead of $30,000.
c. under-allocated overhead of $6,000.
d. over-allocated overhead of $30,000.

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Kolawole845

Answer:

Under allocated overhead $6,000

Explanation:

The under or over allocated overhead is the difference between the allocated overhead and the actual overhead.

Allocated overhead = OAR × Actual hours

POAR = Budgeted overhead/Budgeted labour hours

= $150,000/10,000

= $15 per hour                                                        

                                                                               $

Allocated Overhead- ($15× 12,000)                   180,000              

Actual overhead                                                  186,000

Under allocated overhead                                  6,000

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