Rainbow manufactures wooden backyard playground equipment. Rainbow estimated $1,785,000 of manufacturing overhead and $2,100,000 of direct labour cost for the year.
After the year was over, the accounting records indicated that the company had actually incurred $1,700,000 of manufacturing overhead and $2,200,000 of direct labour cost.
1. Calculate Rainbow’s predetermined manufacturing overhead rate assuming that the company uses direct labour cost as an allocation base.
2. How much manufacturing overhead would have been allocated to manufacturing jobs during the year?
3. At year-end, was manufacturing overhead overallocated or underallocated? By how much?