Use the following to answer questions:
Mansfield Corporation estimates its manufacturing overhead costs to be $160,000 and its direct labor costs to be $320,000 for 2007. The actual manufacturing labor costs were $80,000 for job 1, $120,000 for job 2 and $160,000 for job 3 during 2007. Manufacturing overhead is applied to jobs on the basis of direct labor costs using a predetermined overhead rate. The actual manufacturing overhead cost for the year was $172,000.
-The amount of the manufacturing overhead variance during 2007 was:
A) $ 8,000 Overapplied
B) $12,000 Overapplied
C) 12,000 Underapplied
D) $ 8,000 Underapplied

Question

Quizplus · Accepted Answer

The predetermined overhead rate is $160,000/$320,000 = 0.5. The applied overhead is $80,000 x 0.5 = $40,000 for job 1, $120,000 x 0.5 = $60,000 for job 2, and $160,000 x 0.5 = $80,000 for job 3. The total applied overhead is $40,000 + $60,000 + $80,000 = $180,000. The manufacturing overhead variance is $180,000 - $172,000 = $8,000 overapplied.

Use the Following to Answer Questions