Calculate rate and analyze year-end results (Learning Objective 4)

Rainbow manufactures wooden backyard playground equipment. Rainbow estimated $1,785,000 of manufacturing overhead and $2,100,000 of direct labor 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 labor cost.

1. Calculate Rainbow’s predetermined manufacturing overhead rate assuming that the company uses direct labor cost as an allocation base.

2. How much manufacturing overhead would have been assigned to manufactur¬ ing jobs during the year?

3. At year-end, was manufacturing overhead overallocated or underallocated? By how much? (Hint: Use a T-account to aid in your analysis.)