Manufacturing overhead was estimated to be $200,000 for the year along with 20,000 direct labor hours.Actual manufacturing overhead was $215,000,and actual labor hours were 21,000.Which of the following would be correct?

Question

Quizplus · Accepted Answer

The overhead is underapplied when the actual overhead costs exceed the estimated overhead costs applied to the products. The estimated overhead rate is $200,000 / 20,000 hours = $10 per hour. With 21,000 actual labor hours, the applied overhead would be 21,000 hours * $10/hour = $210,000. Since the actual overhead was $215,000, it is underapplied by $215,000 - $210,000 = $5,000.

Manufacturing Overhead Was Estimated to Be $200,000 for the Year