Assume the following: Actual overhead costs equaled estimated overhead.Actual direct labor hours exceeded estimated direct labor hours used to calculate the predetermined overhead rate.If overhead is applied using the predetermined overhead rate, then overhead is
A) overapplied.
B) underapplied.
C) $-0-.
D) indeterminable from the information given.

Question

Quizplus · Accepted Answer

Actual overhead costs equaled estimated overhead, so there is no over- or underapplied overhead from that perspective. However, actual direct labor hours exceeded estimated direct labor hours, which means that the predetermined overhead rate was too low. As a result, overhead is underapplied.

Assume the Following: Actual Overhead Costs Equaled Estimated Overhead