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In a company where manufacturing overhead is applied based on machine hours, the predetermined allocation rate is $3 per machine hour. Actual machine hours were 3,000 and actual manufacturing overhead was $8,000. Is overhead underallocated or overallocated and by how much?

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Answer:

The overhead is over allocated by $1000.

Step-by-step explanation:

The manufacturing overhead is applied based on machine hours, the predetermined allocation rate is $3 per machine hour.

Actual machine hours were 3,000 making the cost as = [tex]3000\times3=9000[/tex]dollars

But the actual manufacturing overhead was $8,000.

So, the overhead is over allocated by = [tex]9000-8000=1000[/tex] dollars

Therefore, the answer is over allocated by $1000.

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