Sullivan Company Uses a Predetermined Overhead Rate Based on Machine

Multiple Choice

Sullivan Company uses a predetermined overhead rate based on machine hours to allocate manufacturing overhead to jobs. The company estimated that it would incur $500,000 of manufacturing overhead during the year and that 200,000 machine hours would be used. During the year, the company actually incurred manufacturing overhead costs of $590,000 and 220,000 machine hours were used.

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

A) $40,000 underallocated
B) $40,000 overallocated
C) $90,000 underallocated
D) $90,000 overallocated