Sullivan Company Uses a Predetermined Overhead Rate Based on Direct

Multiple Choice

Sullivan Company uses a predetermined overhead rate based on direct labour hours to allocate manufacturing overhead to jobs. The company estimated that it would incur $500,000 of manufacturing overhead during the year and that 100,000 direct labour hours would be worked. During the year, the company actually incurred manufacturing overhead costs of $590,000 and 120,000 direct labour hours were worked.

By how much was manufacturing overhead overallocated or underallocated for the year?

A) $10,000 underallocated
B) $10,000 overallocated
C) $90,000 underallocated
D) $90,000 overallocated