Question

Tea Tree Manufacturing provided the following details for the year: Direct Materials Used $83,000; Direct Labor Incurred $191,000; Manufacturing Overhead Incurred $300,000; Manufacturing Overhead Allocated to production $297,000; Costs of jobs completed and transferred $500,000. Was Manufacturing Overhead overallocated or underallocated and by what amount?

Answer 1

Answer:

Therefore, Manufacturing Overhead is overallocated by $71,000.

Explanation:

This can be determined as follows:

Direct Materials Used + Direct Labor Incurred + Production Manufacturing Overhead = Costs of jobs completed and transferred

Substituting values for the equation above, we have:

$83,000 + $191,000 + Production Manufacturing Overhead = $500,000

Production Manufacturing Overhead = $500,000 - $83,000 + $191,000 = $226,000.00  

Difference = $297,000 - $226,000 = $71,000 over allocation.

Therefore, Manufacturing Overhead is overallocated by $71,000.