Chapter 2, Problem 6ME

To determine

Concept introduction:

Predetermined overhead allocation:

Manufacturing overhead cost is the pool of all indirect costs incurred for production. These are the costs which are not directly traceable to the product. Manufacturing costs include indirect material indirect labor and overheads. These costs are allocated to the products using the predetermined overhead allocation rate. The formula of predetermined overhead allocation rate is as follows:

$\text{Predetermined overhead allocation rate = }\frac{\text{Estimated Manufacturing overhead Cost}}{\text{Allocation base}}$

To calculate:

The Over or Under Applied overhead cost and account to be affected for recording the over or under applied overhead cost.