Q. 10SE-c - Horngren'S Financial And Managerial Accounting

Question

The T-account showing the manufacturing overhead activity for Aliyah Corp. for 2018 is as follows:

                                             Manufacturing overhead

195000

203,000

Requirements

3. Is manufacturing overhead underallocated or overallocated? By how much?

Step-by-Step Solution

Answer

The manufacturing overhead is overallocated by the amount $8,000

Step 1: Over allocation of overhead

The allocation of overhead is over allocated when the actual overhead incurred by the company is less than the allocated manufacturing overhead. 

Step 2: Overallocated overhead amount

$$\begin{gathered} \mathbf{Overallocatedoverhead}\mathbf{=}\mathbf{Allocatedoverhead}\mathbf{-}\mathbf{Actualoverhead} \\ \mathbf{=}\mathbf{\$}\mathbf{203}\mathbf{,}\mathbf{000}\mathbf{-}\mathbf{\$}\mathbf{195}\mathbf{,}\mathbf{000} \\ \mathbf{=}\mathbf{\$}\mathbf{8}\mathbf{,}\mathbf{000} \end{gathered}$$

The manufacturing overhead of the company is overallocated by the amount of $8,000.