Malcolm Company uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. The cost records for September will show:
A)Overapplied manufacturing overhead of $1,500
B)Underapplied overhead of $1,500
C)Overapplied manufacturing overhead of $3,500
D)Underapplied overhead of $3,500

Question

Malcolm Company uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs.  The cost records for September will show:
A)Overapplied manufacturing overhead of $1,500 
B)Underapplied overhead of $1,500 
C)Overapplied manufacturing overhead of $3,500 
D)Underapplied overhead of $3,500

Quizplus · Accepted Answer

Predetermined overhead rate = Estimated total manufacturing overhead F1F1F1S1F1F1F10 Estimated total amount of the allocation base
= $17,000 F1F1F1S1F1F1F10 13,600 direct labor-hours
= $1.25 per direct labor-hour
Applied overhead = Predetermined overhead rate F1F1F1S1F1F1F10 Actual direct labor-hours
= $1.25 per direct labor-hour F1F1F1S1F1F1F10 12,000 direct labor-hours
= $15,000
Overapplied/underapplied manufacturing overhead = Actual manufacturing overhead - Applied overhead
= $18,500 - $15,000
= $3,500 Underapplied

Malcolm Company Uses a Predetermined Overhead Rate Based on Direct