Fogg Company, which uses labor hours to apply overhead to manufacturing, may have increased amounts of underapplied overhead at month-end if:
A) suppliers of direct materials have an across-the-board price increase.
B) an accountant failed to record the period's charges for plant maintenance and security.
C) employees are hit hard with a widespread outbreak of the flu.
D) direct laborers are granted a wage increase.
E) outlays for advertising expenditures are increased.

Question

Quizplus · Accepted Answer

If employees are hit hard with a widespread outbreak of the flu, fewer labor hours would be worked than expected, leading to underapplied overhead since overhead is applied based on labor hours.

Fogg Company, Which Uses Labor Hours to Apply Overhead to Manufacturing