Mackinaw Manufacturing Corporation uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. Last year, the Corporation worked 17,000 actual direct labor-hours and incurred $145,000 of actual manufacturing overhead cost. They had estimated at the beginning of the year that 16,000 direct labor-hours would be worked and $144,000 of manufacturing overhead costs incurred. The Corporation had calculated a predetermined overhead rate of $9 per direct labor-hour. The Corporation's manufacturing overhead for the year was:
A) overapplied by $8,000
B) underapplied by $8,000
C) overapplied by $1,000
D) underapplied by $1,000

Question

Quizplus · Accepted Answer

The predetermined overhead rate was $9 per direct labor-hour. With 17,000 actual hours worked, the applied overhead was 17,000 x $9 = $153,000. The actual overhead was $145,000, so the overhead was overapplied by $153,000 - $145,000 = $8,000.

Mackinaw Manufacturing Corporation Uses a Predetermined Overhead Rate Based on Direct