Lopar Company uses a predetermined overhead rate based on direct labor dollars. Lopar Company estimated that its 2010 overhead would total $938,000 and that 2010 direct labor costs would be $670,000. During 2010, actual overhead costs were $960,000, and actual direct labor costs were $700,000. By how much was Lopar's overhead over- or underapplied?
A) $20,000 overapplied
B) $20,000 underapplied
C) $18,000 overapplied
D) $10,000 underapplied

Question

Quizplus · Accepted Answer

The predetermined overhead rate is $938,000 / $670,000 = $1.4. The overhead applied to production is $700,000 * $1.4 = $980,000. The overhead overapplied is $980,000 - $960,000 = $20,000.

Lopar Company Uses a Predetermined Overhead Rate Based on Direct