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Direct Labor Cost: Direct Labor Cost is a direct
Manufacturing
Predetermined Overhead Allocation Rate: A predetermined overhead allocation rate is used to assign the indirect manufacturing overhead costs to the units of production. It is computed by dividing the estimated overhead cost by an estimated quantity of allocation base.
Allocation Base: An allocation base is used to allocate the indirect overhead costs. For example: Direct labor hours, machine hours, direct labor cost etc.
The manufacturing overhead is said to be overallocated when allocated manufacturing overhead costs are more than the actual manufacturing overhead costs. In the Manufacturing Overhead T-account, if the total amount of credit side is more than the total amount of debit side, then the manufacturing overhead is said to be overallocated and the T-account has a credit closing balance.
The manufacturing overhead is said to be underallocated when actual manufacturing overhead costs are more than the allocated manufacturing overhead costs. In the Manufacturing Overhead T-account, if the total amount of debit side is more than the total amount of credit side, then the manufacturing overhead is said to be underallocated and its T-account has a debit closing balance.
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To Compute: The predetermined overhead allocation rate per direct labor dollar.
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To Prepare: The
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The amount of underallocated or overallocated manufacturing overhead by using a T-account.
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To Prepare: The journal
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Chapter 19 Solutions
Horngren's Accounting (12th Edition)
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