Reference no: EM132471998

Point 1: During its first year of operations, Salt Company had estimated total manufacturing overhead to be $2,300,100. Salt Company used direct labor hours as an allocation base for the predetermined overhead rate. Estimated total direct labor hours for the year was 18,700 and actual total direct labor hours amounted to 22,800. The direct labor wage rate is $22/hr. Actual manufacturing overhead was 109% of estimated total manufacturing overhead.

Point 2: The ending balances in work-in-process, finished goods inventory, and cost of goods sold before any adjustment for over or under-allocated manufacturing overhead were $535,000, $1,260,000, and $2,950,000 respectively. An analysis of the account balances concluded that actual direct labor cost was 8% of the account balance for all three accounts.

Question 1) Suppose Salt Company has a policy of allocating any over or under-allocated manufacturing overhead to cost of goods sold. Calculate the amount of over or under-allocated manufacturing overhead.

1. Salt Company's manufacturing overhead rate:
2. Total Manufacturing overhead allocated:
3. Actual Manufacturing Overhead:
4. Over-allocated: