Assume that budgeted total overhead is $1,000,000 and that budgeted machine-hours are 100,000 for the coming period. Actual overhead was $1,006,000 and actual machine-hours were 102,000. Overhead for the period is (overapplied / underapplied) by $.

Instructions are listed below.

Explanation:

Giving the following information:

Budgeted total overhead is $1,000,000

Budgeted machine-hours are 100,000.

Actual overhead was $1,006,000 and actual machine-hours were 102,000.

First, we need to calculate the estimated overhead rate. Then, we can allocate overhead based on actual machine-hours. Finally, we determine the under/over-allocated.

To calculate the estimated manufacturing overhead rate we need to use the following formula:

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Estimated manufacturing overhead rate= 1,000,000/100,000= $10 per machine hour

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Allocated MOH= 10*102,000= $1,020,000

Finally, we determine under/over allocation:

Over/under allocation= real MOH - allocated MOH

Over/under allocation= 1,006,000 - 1,020,000= $14,000 overallocated

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