Gonzalez, Inc.

manufactures stereo speakers in two factories; one in Vandalia, Illinois and another in
Modesto, California. The Vandalia factory uses DL$ for its overhead rate and the Modesto factory uses
machine-hours (MHs) for its overhead rate. Information related to both plants for last year is presented
below:

Vandalia factory Modesto factory

Estimated manufacturing overhead ........... $1,000,000 $1,600,000

Estimated amount of allocation base ......... (a)______________ 200,000 MHs

Predetermined overhead rate ..................... $10 per DL$ (d)______________

Actual amount of allocation base ............... (b)______________ 190,000 MHs

Actual manufacturing overhead ................. $1,092,500 $1,472,500

Applied manufacturing overhead ............... $1,010,000 (e)_______________

Under or overapplied overhead .................. (c)______________ (f)_______________

Answer:

(a) = $100,000; $1,000,000/$10

(b) = $101,000; $1,010,000/$10

(c) = $82,500 underapplied; $1,092,500 - $1,010,000

(d) = $8 per MH; $1,600,000/200,000

(e) = $1,520,000; 190,000 × $8

(f) = ($47,500) overapplied; $1,472,500 - $1,520,000