Precision Company data:$\begin{array}{lrr}
\text { Actual manufacturing overhead cost incurred} &£ 84,000\
\text {Actual direct Labour hours worked } &
27,000\
\end{array}$

Precision Company used a predetermined overhead rate last year of £3 per direct Labour hour, based on an estimate of 24,000 direct Labour hours to be worked during the year.
The under- or overapplied overhead for the year was:

A)£3,000 underapplied.
B)£3,000 overapplied.
C)£12,000 underapplied.
D)£12,000 overapplieD.

Question

Precision Company data:$\begin{array}{lrr}
  \text {  Actual manufacturing overhead cost incurred} &£ 84,000\
 \text {Actual direct Labour hours worked  } &
27,000\
\end{array}$
 
Precision Company used a predetermined overhead rate last year of £3 per direct Labour hour, based on an estimate of 24,000 direct Labour hours to be worked during the year.
The under- or overapplied overhead for the year was:

A)£3,000 underapplied.
B)£3,000 overapplied.
C)£12,000 underapplied.
D)£12,000 overapplieD.

Quizplus · Accepted Answer

The predetermined overhead rate was £3 per direct labor hour, and 27,000 hours were actually worked, leading to applied overhead of £81,000 (27,000 hours x £3). The actual overhead was £84,000, resulting in £3,000 underapplied (£84,000 - £81,000).

Precision Company Data Precision Company Used a Predetermined Overhead Rate Last Year of overhead