Question

Question: Smith Company expected to incur \(10,000 in manufacturing overhead costs and use 4,000 machine hours for the year. Actual manufacturing overhead was \)9,700, and the company used 4,250 machine hours.

9. Calculate the predetermined overhead allocation rate using machine hours as the allocation base.

10. How much manufacturing overhead was allocated during the year?

Short answer

Answer:

Predetermined overhead allocation rate is $2.50 and the allocated manufacturing overhead is $10,625

Step-by-step solution

Predetermined overhead allocation rate

$$\begin{gathered} \mathbf{\text{Predeterminedalloationoverheadrate=}}\frac{\mathbf{T}\mathbf{o}\mathbf{t}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{e}\mathbf{s}\mathbf{t}\mathbf{i}\mathbf{m}\mathbf{a}\mathbf{t}\mathbf{e}\mathbf{d}\mathbf{}\mathbf{}\mathbf{o}\mathbf{v}\mathbf{e}\mathbf{r}\mathbf{h}\mathbf{e}\mathbf{a}\mathbf{d}\mathbf{}\mathbf{C}\mathbf{o}\mathbf{s}\mathbf{t}}{\mathbf{T}\mathbf{o}\mathbf{t}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{e}\mathbf{s}\mathbf{t}\mathbf{i}\mathbf{m}\mathbf{a}\mathbf{t}\mathbf{e}\mathbf{d}\mathbf{}\mathbf{q}\mathbf{u}\mathbf{a}\mathbf{n}\mathbf{t}\mathbf{i}\mathbf{t}\mathbf{y}\mathbf{}\mathbf{o}\mathbf{f}\mathbf{}\mathbf{t}\mathbf{h}\mathbf{e}\mathbf{}\mathbf{o}\mathbf{v}\mathbf{e}\mathbf{r}\mathbf{h}\mathbf{e}\mathbf{a}\mathbf{d}\mathbf{}\mathbf{a}\mathbf{l}\mathbf{l}\mathbf{o}\mathbf{c}\mathbf{a}\mathbf{t}\mathbf{i}\mathbf{o}\mathbf{n}\mathbf{}\mathbf{r}\mathbf{a}\mathbf{t}\mathbf{e}} \\ \mathbf{\text{=}}\frac{\mathbf{\$}\mathbf{10}\mathbf{,}\mathbf{000}}{\mathbf{4000}} \\ \mathbf{\text{=\$2.50}} \end{gathered}$$

Manufacturing overhead allocation during the year

$$\begin{gathered} \mathbf{\text{allocatedmanufacturingoverhead=PredeterminedallocationOverheadrate×Actualquantityoftheallocationbase}} \\ \mathbf{\text{=\$2.50×\$4,250}} \\ \mathbf{\text{=\$10,625}} \end{gathered}$$