If the company bases its predetermined overhead rate on capacity, by how much was manufacturing overhead underapplied or overapplied?
A)$664,020 Underapplied
B)$223,965 Overapplied
C)$664,020 Overapplied
D)$223,965 Underapplied

Question

Quizplus · Accepted Answer

Since the predetermined overhead rate was based on capacity, the actual overhead incurred may differ from the estimated overhead based on the actual level of activity. In this case, the company had $664,020 of underapplied overhead, which means that the actual overhead incurred was more than the estimated overhead based on capacity.

If the Company Bases Its Predetermined Overhead Rate on Capacity