Answer:
Underapplied overhead= $20,000
Explanation:
<u>Giving the following information: </u>
Estimated Actual
Direct Labor Hours: 600,000 550,000
Manufacturing Overhead Estimated $720,000 $680,000
<u>I assume that we need to calculate the over/under applied overhead.</u>
<u>First, we need to determine the predetermined overhead rate:</u>
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Predetermined manufacturing overhead rate= 720,000/600,000
Predetermined manufacturing overhead rate= $1.2 per direct labor hour
<u>Now, we apply overhead based on actual hours:</u>
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Allocated MOH= 1.2*550,000
Allocated MOH= $660,000
<u>Finally, the under/over applied overhead:</u>
Under/over applied overhead= real overhead - allocated overhead
Under/over applied overhead= 680,000 - 660,000
Underapplied overhead= $20,000