Chapter 3, Problem 3.11SE

Calculating overallocated or underallocated overhead (Learning Objective 5)

Well-Flow Company had estimated $1,053,000 of manufacturing overhead (MOH) for the year and 58,500 direct labor (DL) hours, resulting in a predetermined MOH rate of $18 per DL hour. By the end of that year, the company had actually incurred $1,005,000 of MOH costs and had used a total of 57,000 DL hours on various jobs.

1. 1. By how much did the company overallocate or underallocate MOH for the year?
2. 2. Was MOH overallocated or underallocated for the year? How do you know?